Pakistan’s Finance Ministry has shared an optimistic forecast for the economy, citing a decline in inflation and growth in key sectors like manufacturing and agriculture. According to its Economic Update and Outlook for October 2024 report, inflation is expected to further decrease, providing a conducive environment for economic recovery.
Easing Inflation
Inflation is projected to remain between 6-7% in October, potentially dropping to 5.5-6.5% by November. September’s inflation rate hit a 44-month low at 6.9%, significantly reduced from last year’s 31.4% in the same period. This decline is attributed to enhanced supply chains for key commodities and government measures to curb inflation.
Manufacturing Growth
Large-scale manufacturing (LSM) continues to show mixed results, yet signals of recovery are evident. LSM output grew by 4.7% in August 2024, with 13 of 22 key sectors seeing positive growth, including textiles, food, chemicals, and automobiles. The automotive sector saw production and sales growth of 18.1% and 17% respectively, driven by strong increases in vehicles, especially trucks and buses. Cement exports also rose by 22.2%, reflecting solid domestic and international demand.
Agricultural Expansion
Agriculture has become a key growth driver, registering a 6.25% increase due to better policies, increased credit, and mechanization. The report highlights a 33.8% rise in agricultural credit from July to March and a 115.9% boost in agricultural machinery imports, reflecting expanding mechanization. Fertilizer production also grew by 3.7%, though urea usage dropped 19.7%, while DAP saw an 82.5% rise.
Strengthened External Trade
On the trade front, exports reached $7.5 billion, marking a 7.8% increase, while imports grew to $14.2 billion. Remittances hit a record $8.8 billion, up 39%, primarily from Saudi Arabia. Foreign Direct Investment (FDI) rose by 48.2% to $771 million, led by contributions from China and the UK.
