Economic consequences: Markets brush off verdict, expect PPP to survive

Published: April 27, 2012
The stock market had a mild scare but economists say their forecasts for 2013 remain unchanged.

The stock market had a mild scare but economists say their forecasts for 2013 remain unchanged.


It is perhaps a testament to the strength democratic rule has gained in Pakistan that Prime Minister Yousaf Raza Gilani’s conviction for contempt of court has resulted in no major changes in expectations of the country’s economic future.

Economists and market analysts interviewed by The Express Tribune largely brushed off the verdict, saying that while they would be carefully monitoring the political developments over the coming days, they do not expect a major change in either the coming year’s budget deficit, nor the stability of the economy as a whole, nor even the country’s capital markets.

“People will only be worried if the political drama gets really messy,” said Imtiaz Gadar, an economist at KASB Securities, an investment bank.

Gadar believes that the overall outlook for the economy remains unchanged. “It is an election year, so we know that none of the economic reforms we need will actually happen. That expectation remains unchanged. We also expected the government would increase spending [in fiscal year 2013]. That expectation is also the same.”

Some economists actually have a favourable view of the higher government spending. Muzzammil Aslam, a macroeconomic analyst at JS Global Capital, argues that it would effectively act as a stimulus to a sluggish economy. He also brushes off concerns that it might increase inflation.

The expectations for the budget deficit itself for fiscal year 2013 – an election year – while high, are outlandish. “We estimate that the deficit will come to about 5.8% of the total size of the economy,” said Gadar.

“We do not anticipate the budget deficit ballooning beyond 5%,” said the more optimistic Aslam.

As for the day’s events itself, the country’s capital markets had somewhat mixed reactions, though there was no crash of the sort seen after former Prime Minister Benazir Bhutto’s assassination. The bond market in Karachi was particularly indifferent, effectively yawning at today’s political drama. “There were no real changes in yields or volumes,” said one trader.

The stock market went through more of a see-saw, with very little trading taking place during the first half-hour after the Karachi Stock Exchange opened at 9:30 am. Then, at 10:07 am, when the verdict was first announced (or rather misinformation about the verdict came to be known), the market panicked. The KSE-100 index plunged 200 points (about 1.5%) over the next 90 minutes, before eventually rallying back into positive territory. Nonetheless, the market closed in negative territory, down 151 points, or about 1.1%.

Published in The Express Tribune, April 27th, 2012.

Facebook Conversations

Reader Comments (1)

  • Abdul Moiz
    Apr 27, 2012 - 8:58AM

    The president issued a presidential ordinance on Thursday night when the entire country’s and the media’s total attention was diverted to the contempt of court case.The ordinance allows black money to be whitened in the stock market.Everyone is allowed to invest in the stock market now and the govt. has made the law that no one in the govt. will ask the source of income for this money invested.
    This is legalised money laundering, all the businessmen,industrialists and brokers will now convert billions of rupees of their ill-gotten money black money into White through the stock market. The media has totally ignored this presidential ordinance because of the supreme court case.


More in Business