Pakistan’s headline inflation is projected to stay within the range of 4-5% for December 2024, according to the Finance Division’s Monthly Economic Update and Outlook released on Friday.
The report underscored that the country’s “hard-earned” economic stability is expected to continue, buoyed by remittance inflows, export performance, and controlled imports. It highlighted that exchange rate stability and a further decline in inflation would sustain the improving economic landscape.
Pakistan’s inflation, which surged to a record 38% in May last year, has been on a consistent downward trajectory. In November 2024, inflation fell to 4.9% year-on-year, marking the lowest level since May 2018. This was a significant drop from October’s 7.2%, as per data from the Pakistan Bureau of Statistics (PBS).
The Finance Division expressed optimism that further easing of monetary policy could stimulate economic activity. Earlier this month, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) slashed the policy rate by 200 basis points to 13%, marking a cumulative reduction of 900 basis points since June 2024 over five successive meetings.
Rising Economic Confidence
The report highlighted growing private-sector credit demand as a positive indicator of increasing economic confidence. This momentum, coupled with improved fiscal performance during July-October driven by higher revenues and prudent expenditure management, is expected to enhance fiscal space for development spending and sustainable growth.
Sectoral Insights
Agriculture:
The government remains focused on achieving crop production targets by supporting farmers, though weather conditions pose potential challenges. Below-average rainfall during the Rabi season may create water stress for key crops like wheat and barley, particularly in rain-fed agricultural regions.
Large-Scale Manufacturing (LSM):
Despite hurdles in certain industries, high-weighted sectors within LSM demonstrated robust performance in October. The automobile and cement sectors, in particular, recorded strong growth in November, boosting allied industries and reinforcing broader economic growth.
As Pakistan approaches the end of 2024, the Finance Division’s outlook points toward continued economic recovery, driven by policy measures, sectoral resilience, and a steady decline in inflation.
