After relatively better economic activity in FY14, we expect economy to stay on growth track. Although improvement and better performance to continue from all side but inflation likely to settle around 6.2% in FY15. Likewise, higher remittances and lower current account deficit will provide cushion to government.

GDP to grow at 4.6% in FY15

We anticipate economy growth to continue with a growth of 4.6% in FY15. The main factor likely responsible for higher economic growth would be servicing sector as sector is expected to post growth of 4.1% on back of growth from finance & insurance sector, general government services and transport sector. Similarly, agriculture sector would also perform well due to better output expected from major and minor crops.

Inflation likely to ease at 6.1% in FY15
Recent data shows that headline inflation for the month of Dec’14 eases to 4.3% YoY as compared to 3.96% in the previous month and 9.2% in December 2013. This is mainly due to lower fuel prices and reduction in food prices which have a major chunk in CPI. Transport cost which has weightage of 7.20% declined by 6.02% remain major contributor driven by lower oil prices. Food, Non-alcoholic and Beverages has the highest weight age of 34.83% in CPI marginally swell by 2.53% YoY in the month of December’14. We expect full year estimates of inflation to remain at 6.1% in FY15 against government target of 8%.

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Azee Research