The Asian Development Bank (ADB) has revised Pakistan’s growth forecasts upwards to 2.5% for FY2024 and to 3.0% for FY2025.
“Greater macroeconomic stability following the approval of the new IMF program under the Extended Fund Facility (EFF) in September will support recovery,” the ADB said in its latest Asian Development Outlook (ADO) for December 2024.
The ADB had forecasted Pakistan’s growth at 2.8% in September.
According to the outlook report, Pakistan’s industrial output growth is projected to accelerate with the suspension of import management measures, higher investor confidence, and easier access to foreign exchange.
The report said that a more accommodative monetary policy because of faster-than-expected easing of inflationary pressures should further support economic activity through rebounding private investment.
However, growth in agriculture is expected to weaken due to the heavy monsoon downpours during July–September 2024 and flood-like conditions in parts of the country. Wheat and cotton, two of Pakistan’s five major crops, are projected to perform poorly in FY2025.
The inflation forecast for FY2025 for Pakistan is revised downwards to 10.0% from 15.0% in ADO September 2024 due to faster-than-expected easing of inflationary pressures.
The report noted that Consumer Price Index (CPI) inflation declined to single digits in August, reflecting high base effects, the impact of contained demand-side pressures, improved supplies of major food items, more favorable global commodity prices, and a delay in upward adjustments in administered energy prices.
According to ADO, developing Asia’s growth remains steady, but policies under the incoming Trump administration in the United States may impact the region. Changes to US trade, fiscal, and immigration policies could dent growth and boost inflation in developing Asia.
The growth forecast for developing Asia is trimmed to 4.9% for 2024 and 4.8% for 2025. Most adjustments to 2024 growth projections for individual economies and subregions are based on recent data releases.
The downward revisions to East Asia and South Asia offset the stronger growth in the Caucasus Central Asia and Southeast Asia, shaving 0.1 percentage points from growth in the region. For 2025, slower growth is expected in South Asia due to weaker domestic demand prospects.
The growth forecasts for South Asia have been revised downward to 5.9% for 2024 and 6.3% for 2025. The lower forecast for 2024 is mainly due to India’s lower-than-expected Q2 growth, driven by dampened manufacturing sector performance and lagging government spending.
While growth forecasts for Pakistan and Sri Lanka have been upgraded due to their recovery from the macroeconomic challenges of 2022– 2023, downward revisions for Bangladesh and Maldives have further weighed on the 2024 outlook.
Developing Asia’s inflation forecasts are adjusted down to 2.7% in 2024 and 2.6% in 2025, mainly due to softening global commodity prices. In China, the 2024 inflation forecast has been reduced to 0.3% on weaker-than-expected domestic demand, while the 2025 forecast is also lowered, to 0.9%.
In South Asia and Southeast Asia, several economies downgraded their forecasts due to slower-than-expected inflation in recent months and an expected decline in oil prices during 2025.
