In August, it was reported that Pakistan National Shipping Corporation (PNSC) had decided to enhance its shipping fleet and replace several of its old vessels. The company was preparing to buy two doublehull aframax tankers at an estimated cost of US$60mn. The company also planned to purchase another three tankers, two containerships and bulk carriers, and four or five general cargo vessels. PNSC was also considering establishing a joint venture with South Korean, Japanese and Chinese shipyards to construct vessels on a shared-equity basis. We see the expansion of the countrys tanker fleet as a necessary move in meeting Pakistans increasing demand for crude oil imports. Because of its poorly equipped liquid bulk fleet,we caution that Pakistan is likely to become more reliant on foreign shipping lines to service its import needs over the next few years, making the continued expansion of its domestic fleet a priority for the government.

We now estimate GDP growth of 2.0% in 2009, quite sharply down on the 4.1% rate achieved in 2008. A weak recovery will begin in 2010 with GDP gaining 2.5%. However, growth will be subdued over the next five years, as Pakistan contends with the global slowdown and continuing internal political uncertainty. For the extended 2010-2014 forecast period we are now expecting average annual growth of 3.3%, down on the 5.5% achieved across the preceding five years, meaning that the effect on our freight traffic forecasts, if comparing the two periods, is negative. Broadly speaking, we maintain earlier changes to our mode-specific forecasts. Perhaps the most important, was to once more put back the expected surge in pipeline throughput to later in the forecast period because of expected delays, as discussions on the Iran-Pakistan-India (IPI) project continue. We believe that the growth of freight carried by road slowed in the tail end of 2005 due to the disruption caused by the earthquake, but recovered strongly as part of the relief and reconstruction effort. Rail freight turnover will lag behind GDP because of the poor state of the railway network and the absence of much-needed investment in modernisation. Taking all these factors into account, our forecasts for freight carried across all modes, and measured in mntkm, stands at an annual average of 4.3% in the 2010-2014 period.

According to our latest estimates, the transport and communications sector grew by 2.0% in 2009, on a par with overall GDP. For the 2010-2014 forecast period we expect the transport and communications sector to just outpace the wider economy. It will achieve average annual growth of 3.5%, versus 3.3% for overall GDP. The total value of the transport and communications sector will rise to US$31.6bn in nominal terms by 2014, representing 13.2% of Pakistan's GDP. The transport and communications sector employed 2.93mn people, or 6.4% of the labour force, in 2009. We see both those figures rising, to 3.37mn people or 6.7% by 2014.

Our forecast assumes that the country's ports – susceptible to bottlenecks and infrastructural delays – are able to cope with increased demand. There have been reports of congestion, particularly at Karachi, but development projects such as the new container terminal should alleviate this problem. In addition, congestion does not appear to be a major issue at Port Qasim. The greater benefits of the Gwadar project will only become fully apparent beyond the current forecast period. On the land transport side, we expect that the market share attributed to the railways is likely to diminish, as there is no evidence of major investment in Pakistan Railway (such as network extensions). If it is to regain a share of around 4% of the overall transport sector, the rail network will need to be rehabilitated and maintained at a higher level than at present. In fact, on current trends our forecast suggests rail's share will fall to just under 2% of total freight turnover. Despite a general government pledge to look at privatisation of the rail sector, we do not foresee significant progress along this route in the early part of the forecast period. Road transport will remain the largest sector, accounting for nearly 85% of all freight movements by the end of the forecast period.

We expect road haulage to be one of the fastest-growing transport modes, with an annual average expansion of 4.3% in the forecast period. Pipeline throughput, as a result of current pipeline projects, will expand by 4.0% on average each year. Airfreight will be affected by the global downturn in aviation, with growth of 4.8% per annum. Slower international trade will also hit shipping in 2009, but the sector will still achieve average annual growth of 5.2% over the next five years. Rail freight will be the laggard with growth of 2.7% per annum.