ADB revises Pakistan's FY25 growth forecast to 3%

January 09, 2025 (MLN): The Asian Development Bank (ADB) has revised Pakistan’s growth forecast upward to 3% for the fiscal year 2024-25, compared to the 2.8% projected in September 2024, according to the report.

The report states that greater macroeconomic stability, following the approval of the new International Monetary Fund (IMF) program under the Extended Fund Facility in September, will aid recovery.

Industrial output growth is expected to accelerate with the suspension of import management measures, improved investor confidence, and easier access to foreign exchange.

A more accommodative monetary policy, due to the faster-than-anticipated easing of inflationary pressures, is expected to further support economic activity through rebounding private investment.

However, growth in agriculture is projected to weaken due to heavy monsoon downpours during July–September 2024 and flood-like conditions in some parts of the country.

Wheat and cotton, two of Pakistan’s five major crops, are expected to perform poorly in FY2025, the report added.

The Asian Development Outlook for December 2024 has also revised Pakistan’s FY2024 growth upward to 2.5%, in line with updated official estimates.

In South Asia, growth forecasts have been revised downward to 5.9% for 2024 and 6.3% for 2025.

The lower forecast for 2024 is attributed to India’s lower-than-expected Quarter 2 growth, driven by weaker manufacturing sector performance and delayed government spending.

Growth forecasts for Pakistan and Sri Lanka have been upgraded due to their recovery from macroeconomic challenges in 2022–2023.

However, downward revisions for Bangladesh and Maldives have further impacted the 2024 outlook.

Growth forecasts for Bangladesh in 2025 have been revised downward due to the lingering effects of political unrest that occurred in July–August 2024.

Growth forecasts for Maldives in 2025 have been lowered due to fiscal consolidation measures, the report further noted.

Some weakening of growth is also expected for Nepal in 2025 compared to earlier forecasts.

The report notes that the growth forecast for developing Asia has been trimmed to 4.9% for 2024 and 4.8% for 2025.

Adjustments to individual economies and sub-regions are based on recent data releases.

Downward revisions to East Asia and South Asia have offset stronger growth in the Caucasus, Central Asia, and Southeast Asia, reducing the region’s growth by 0.1% points.

For 2025, slower growth in South Asia is anticipated due to weaker domestic demand prospects, the report reads.

Developing Asia’s growth remains solid, with strong domestic demand in much of the region and exports continuing to support growth, although momentum has moderated.

The report highlights potential downside risks, including faster and larger US policy shifts, worsening geopolitical tensions, and a weaker PRC property market.

While growth projections for 2024–2025 remain largely unchanged from September, most impacts of the incoming Trump administration’s policy changes will likely be felt beyond the forecast horizon.

Copyright Mettis Link News