World Bank projects 2.3% GDP growth for Pakistan

June 12, 2024 (MLN): The World Bank (WB) has projected Pakistan’s GDP growth rate at 2.3% for the fiscal year 2024-25 against the government’s target of 3.6%.

The bank in its latest report, “Global Economic Prospects”, stated that growth in Pakistan is expected to pick up to 2.3% in FY25 and 2.7% in FY26.

Industrial activity and confidence are projected to improve mainly due to easing import restrictions and moderating inflation, although they remain constrained largely as a result of tight macroeconomic policies.

The expected increase in growth assumes continued sound macroeconomic management, progress with structural reform implementation, and continued multilateral inflows and bilateral rollovers, which would boost investor confidence.

The report noted that activity in Pakistan has improved but remains subdued, with output set to expand 1.8% in FY24 (July 2023 to June 2024), following a contraction of 0.2% in the previous fiscal year.

Industrial production picked up in late 2023 to early 2024 after import controls were relaxed following an improvement in the country’s foreign reserve positions.

Policy uncertainty remains elevated—despite easing from levels seen during bouts of political uncertainty over the last two years

Moreover, monetary and fiscal policies have remained tight and, together with import and capital controls aimed at fostering stability, have continued to constrain activity.

The report further noted that inflation has moderated in Pakistan over the past year due to high base effects coupled with the stabilization of the exchange rate, but it remains high.

Reflecting the persistence of inflation, policy rates have been lifted in most countries in the region.

Several developments have contributed to reductions in external imbalances.

For example, trade deficits have narrowed, including in India.

Other factors include increases in remittances and recoveries in tourism in several countries, as well as the effects of continued import restrictions, particularly in Bangladesh.

Foreign exchange reserves have increased in several countries, including Pakistan and Sri Lanka, reflecting the easing of currency pressures and receipts of official flows, but reserve levels in some countries remain low.

Inflation in the South Asia region is envisaged to moderate, supporting private consumption and contributing to monetary policy easing, although it is expected to remain elevated, particularly in Pakistan, the report added.

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