Senior analyst on investment Hamza Kamal has said that Pakistan’s economic growth for the financial year 2021 is expected to be 3.94 percent YoY, up from –ve 0.47 percent of the previous year, according to the State Bank of Pakistan. The expansion, which is the fastest since FY18, is expected to be broad-based, with services sector contributing the most (+4.4 percent YoY in FY21 vs –0.6 percent in FY20), owing to strong consumer spending following the relaxation of Covid-related restrictions and improved consumer trust, as evidenced by POS transactions, which are up +3.8 percent YoY in 1HFY21. Final numbers are expected to cross 4.5% mark on FY21. Although the latest announcement of 3.94 percent YoY based on data points for 9MFY21 is promising in and of itself, however, Hamza says that the final figure for FY21 could also exceed 4.5 percent YoY. In his opinion, two factors that could boost GDP are LSM growth and Wholesale and retail trade. On the former, Hamza expect LSM growth in FY21 to be 14.5 percent YoY, up from 9.3 percent estimated by authorities, owing to, (i) a low base (4QFY21E: 36.8 percent YoY vs. –24.8 percent YoY in FY20), and ii) the textile sector benefiting from a seasonal uptick in exports in 2Q of CY, overshadowing drag from, (i) supply-side issues, especially in autos, and ii) Ramadan effect and extended Eid holidays in 4QFY21. From the Investment Perspective According to Hamza, the latest GDP figures cast a favourable reverberation for FY22 growth projections, given the government retains an acceptable balance between retaining a business-friendly climate and hitting IMF goals in the upcoming budget. Authorities have already stated that the budget for FY22 would provide funding for the agriculture sector, which has been lagging in recent years. In this context, Hamza recommends constructing positions in the tractor space.