Economic data

• Divisions have already appeared between the parties making up the new coalition government, the Pakistan People's Party (PPP) and the Pakistan Muslim League (Nawaz), or PML (N), indicating that their ability to work together during the forecast period is questionable. The need to share power could undermine co-operation between them, and the main ideological faultline in Pakistani politics—that dividing a liberal, pro-Western camp dominated by the PPP from a more conservative camp represented by the PML (N)—could easily resurface.
• The poor security situation will remain another pressing issue. The early indications are that the new government will prove to be no more effective in stemming the rising tide of attacks by Islamist militants than was the previous, military-backed regime led by the president, Pervez Musharraf (who until November 2007 was also army chief). Failure to make demonstrable progress on this front is likely to place increasing strain on ties with the US.
• The politicisation of the judiciary that has been in evidence since mid-2007 will undermine government unity in the early part of the forecast period, as the PPP and the PML (N) differ strongly over how they wish to deal with judicial issues. Over the longer term it will also further damage the already questionable independence and integrity of the judiciary itself
• Real GDP growth will average 4.9% a year between fiscal year 2008/09 (July-June) and 2011/12, driven by private consumption and investment. The economy will remain dependent on textiles, other manufacturing and services.
• Efforts to control inflation will remain the focus of monetary policy. The Economist Intelligence Unit expects inflationary pressures to increase sharply in 2008 but to diminish again in the remaining years of the forecast period.
• The current account will remain in deficit throughout the forecast period, driven by the widening trade and services balances.
• The Pakistan rupee will continue to depreciate against the US dollar in nominal terms, but this will mask an appreciation in real terms. The currency will ease from an average PRs66.1:US$1 in 2008 to PRs73.5:US$1 in 2012.

Key indicators	2007	2008	2009	2010	2011	2012
Real GDP growth (%; fiscal years ending Jun 30th)	6.0	6.0	4.4	4.9	5.0	5.3
Consumer price inflation (av; %)	7.6	18.6	11.3	6.0	5.8	5.7
Budget balance (% of GDP; fiscal years ending Jun 30th)	-4.5	-6.4	-6.0	-5.0	-4.5	-3.1
Current-account balance (% of GDP)	-5.7	-8.6	-8.3	-8.1	-7.8	-7.7
Short-term interest rate (av; %)	9.3	9.4	9.4	8.8	7.8	7.5
Exchange rate PRs:US$ (av)	60.7	66.1	69.9	71.5	72.5	73.5
Exchange rate PRs:¥100 (av)	51.6	62.8	68.7	75.1	79.0	80.1