Pakistan’s economy is showing signs of modest recovery, with the Asian Development Bank (ADB) projecting a GDP growth of 2.4 percent for the fiscal year 2024, which ended on June 30. The growth is expected to further increase to 2.8 percent in fiscal year 2025, accompanied by a decline in inflation, according to the ADB’s latest report.
The Asian Development Outlook (ADO) September 2024 update highlights that the rebound in economic growth during FY2024 was supported by higher domestic consumption, driven by increased agricultural income and workers’ remittances.
However, the report emphasizes the importance of adhering to Pakistan’s economic reform program to ensure macroeconomic stability and sustained growth, despite existing downside risks.
“Pakistan’s economic prospects are closely tied to the steadfast and consistent implementation of policy reforms to stabilize the economy and rebuild fiscal and external buffers,” stated Yong Ye, ADB Country Director for Pakistan. He stressed the need for Pakistan to consolidate public finances, expand social spending and protection, reduce fiscal risks from state-owned enterprises, and improve the business environment to foster private sector-led growth.
Looking ahead to FY2025, the implementation of the economic adjustment program is expected to support economic activity by providing a more stable macroeconomic environment. For a robust rebound, private investment will require more favorable conditions, including easier access to foreign exchange, which would benefit the manufacturing and services sectors. However, growth in agriculture is projected to slow.
Inflation, which averaged 23.4 percent in FY2024, down from 29.2 percent in FY2023, is expected to ease further to 15 percent in FY2025. This anticipated reduction is attributed to a well-regulated monetary policy, reduced exchange rate volatility, and a stable outlook for international food prices.
The decline in food price inflation, driven by increased agricultural production, contributed significantly to the slowdown in inflation during the latter half of FY2024.
