ADB forecasts 2.8% growth for Pakistan’s economy in FY2025

Economic reforms supported by IMF’s Extended Fund Facility are projected to accelerate growth and ease inflation in Pakistan

The Asian Development Bank (ADB) on Wednesday forecasted Pakistan’s economy is projected to further improve to 2.8% in FY2025, supported by a revival in private investment.

According to Asian Development Outlook (ADO) September 2024, released on Wednesday, the economic reform agenda supported by the three-year International Monetary Fund (IMF) Extended Fund Facility (EFF) was projected to accelerate growth and ease inflation in Pakistan.

“Pakistan’s economy expanded by 2.4% in FY2024, driven by higher consumption following the government’s economic stabilisation and reform program. Growth is projected to further improve to 2.8% in FY2025, supported by a revival in private investment,” the ADB said in its report. 

ADB outlook report further said that Pakistan’s public debt will decline in 2024, but risks remain high as interest payments rose to close to 60% of fiscal revenues. 

The ADB has raised its economic growth forecast for developing Asia and the Pacific this year, amid solid domestic demand and continued strength in exports. ADB has also lowered its forecast for regional inflation.

The region is forecast to grow by 5.0% this year, compared with a projection of 4.9% in April, according to Asian Development Outlook (ADO) September 2024, released on Wednesday. 

The forecast for next year is maintained at 4.9%. Inflation in developing Asia and the Pacific is expected to ease further to 2.8% in 2024, compared with a previous forecast of 3.2%.

The improved economic outlook reflects stronger-than-expected expansions in East Asia, Caucasus and Central Asia, and the Pacific. Rising global demand for semiconductors, driven in part by the artificial intelligence boom, is boosting exports while easing global food prices and the lagged effects of monetary policy tightening have brought inflation down to near pre-pandemic levels.

“Strong economic fundamentals will continue to underpin expansion this year and next,” said ADB Chief Economist Albert Park.

“Financial conditions are expected to improve as inflation moderates further and the US eases its monetary policy, and this will support the positive outlook for the region.”

Risks to the outlook include a worsening of trade tensions between the United States and the People’s Republic of China; further deterioration in the Chinese property market; worsening geopolitical tensions; and the effects of climate change and adverse weather on commodity prices and food and energy security.

The growth forecast for China, the largest economy in developing Asia and the Pacific, remains at 4.8% this year and 4.5% next year. Lingering weakness in China’s property sector has negatively affected household spending during 2024. This has been partially offset by higher investment, underpinned by stimulatory monetary and fiscal policies, and higher exports.

India’s economy—the region’s second largest—is forecast to grow 7.0% in 2024, unchanged from April, amid strong domestic demand including an increase in government spending.

The growth forecast for the Caucasus and Central Asia has been raised to 4.7% this year, compared with a 4.3% projection in April, thanks to improved domestic demand bolstered by remittances in some economies. 

The growth forecast for the Pacific is revised upward to 3.4%, from 3.3% in April, driven by the increase in tourist arrivals. The forecast for Southeast Asia has been lowered by 0.1 percentage points to 4.5%, due to a decline in public investments and slower-than-expected export recovery.

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