ISLAMABAD – The Asian Development Bank (ADB) has noted that Pakistan’s real GDP is projected to grow by 1.9 percent in FY2024 driven by a rebound in private sector investment linked to progress on reform measures and transition to a new and more stable government.
“An expansion in private consumption and a rise in workers’ remittances from a move toward a market-determined exchange rate should buttress growth,” the ADB noted in it recent report, the Asian Development Outlook (ADO) April 2024, ADB’s annual flagship economic publication. However, low confidence, a surge in living costs, and the implementation of tighter macroeconomic policies under the IMF SBA will restrain domestic demand. In FY2025, growth is projected to reach 2.8%, driven by higher confidence, reduced macroeconomic imbalances, adequate progress on structural reforms, greater political stability, and improved external conditions.
The economy shrank as floods, uncertainty, and disrupted external support caused public investment to plunge and private investment and industry to contract. Inflation reached a 5-decade high as supply disruption and currency depreciation propelled increases in food and energy prices. If reforms are implemented, growth is forecast to restart gradually this fiscal year and improve slightly next year. Inflation is projected to moderate somewhat this year, and more next year, under stabilization policies. Improving women’s financial inclusion is critical to strengthen growth.
Output will rise from a low base on improved weather conditions and a government package of subsidized credit and farm inputs that will support expanded area under cultivation and improved yields. Higher farm output will help expand manufacturing, which will also benefit from the increased availability of critical imported inputs. Large-scale manufacturing expanded in 3 of the first 6 months of FY2024. Higher crop output and some improvement in global growth are expected to support recovery in industrial output in the latter half of the year. Construction will remain weak due to elevated construction costs, higher tax rates on property transfers implemented in the FY2024 budget, and rationalization of public investment to consolidate the fiscal position. Growth in services is projected to strengthen in FY2024 as recovery in agriculture and industry benefit services.