he World Bank has upgraded its economic growth forecast for Pakistan, now projecting a rate of 2.8 percent for the fiscal year 2024-25, followed by a rise to 3.2 percent in FY26.
In its latest Global Economic Prospects report, the Bank credits this optimistic outlook to a decline in inflation, an uptick in industrial activity, and a decrease in political uncertainty. For FY24, growth is estimated at 2.5 percent, propelled by strong agricultural performance due to favorable weather conditions and a boost in industrial production following the removal of import restrictions.
In a promising sign for the economy, headline inflation in Pakistan fell into single digits in August 2024 for the first time since late 2021, largely thanks to stringent fiscal and monetary measures. Responding to the easing inflationary pressures, the central bank has begun to lower policy rates.
However, the report also points out persistent hurdles, indicating that restrictive fiscal and monetary policies will continue to hold growth back from reaching its full potential. Furthermore, per capita income growth in Pakistan, along with that of Bangladesh and Sri Lanka, is projected to remain below pre-pandemic levels, hindering poverty reduction efforts and limiting income convergence with wealthier nations.
On a regional scale, growth in South Asia, excluding India, has increased to 3.9 percent in 2024, up from 3 percent in 2023, buoyed by economic recoveries in both Pakistan and Sri Lanka.
While food insecurity has eased in some areas, the report highlights that it remains at more challenging levels than those seen before the pandemic in both Afghanistan and Pakistan.
