FY27 GDP Growth Downgraded to 2.5-3% Due to Rising Oil Prices: Topline
Pakistan’s economy is confronting fresh challenges as global oil prices surge amid ongoing regional conflicts. Brokerage house Topline Securities has released a detailed strategy report highlighting the potential macroeconomic fallout and opportunities in the local equity market. Inflation and Growth Projections Under Pressure Analysts at Topline expect average inflation in the next 12 months to hover between 9-10%, with 4QFY26 possibly exceeding 11%. Every US$10 per barrel increase in oil prices is projected to add around 50 basis points to inflation forecasts.Higher energy costs will also weigh on economic expansion. Topline has revised its FY27 GDP growth forecast downward to 2.5-3.0% from the earlier 4.0%. For FY26, the projection stands at 3.5-4.0%, in line with State Bank guidelines. Current Account and Currency Risks The report warns that slippage in import controls could push the current account deficit beyond US$8 billion (1.9% of GDP) in FY27, putting pressure on foreign exchange reserves. Fiscal deficit is expected to remain in the 4.0-4.5% range for FY26 amid relief spending, with a slight increase possible in FY27. Currency depreciation is projected at 5-6% on average in FY27, though it could accelerate if import management weakens. Remittances from GCC countries are assumed to decline by 10%, contributing to overall moderation in inflows.The stock market has already reacted negatively, with Pakistan posting the third-worst quarterly return globally in Q1 2026. Heavy reliance on imported oil (85% of energy needs) remains a key vulnerability. Despite this, selective opportunities exist in oil and gas exploration and production companies. Topline recommends a cautious approach in cyclicals and favors defensive sectors. Preferred picks include OGDC, PPL, MARL, FFC, ENGROH, MEBL, BAFL, and HUBC. The revised KSE-100 index target stands at 187,000 under current risk-free rate assumptions. Administrative measures on non-oil imports may become necessary to manage the external account, as historical episodes show government intervention plays a critical role during such periods. Overall, the report calls for vigilant monitoring of geopolitical developments and timely policy action to safeguard macroeconomic stability.