Asian Development Bank upgrades Pakistan's economic growth forecast to 3% for FY25

The Asian Development Bank (ADB) has revised Pakistan’s growth in fiscal year 2024-25 (FY25) to 3.0% from 2.8% in September.

It has also revised the inflation rate downward to 10% from 15% due to faster-than-expected easing of inflationary pressures in September, in its latest Asian Development Outlook report.

For FY24, economic growth has been revised upwards to 2.5% from 2.4% previously, in line with the updated official estimates.

Pakistan's inflation declined to single-digits in August, on the back of a high base effect, 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.

The greater macroeconomic stability following the approval of the new Extended Fund Facility by the International Monetary Fund (IMF) in September will support recovery.

Industrial output growth is projected to accelerate with the suspension of import management measures, higher investor confidence, and easier access to foreign exchange.

The growth forecasts for Pakistan and Sri Lanka have been upgraded due to their recovery from the macroeconomic challenges of 2022-2023, according to the report.

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 and flood-like conditions in parts of the country, the ADB report stated.

Wheat and cotton, two of Pakistan’s five major crops, are projected to perform poorly in FY25. The report said that with India re-entering the market, prices for rice exports from Thailand, Vietnam, and Pakistan fell significantly as they adjusted to the renewed competition, easing price pressures that had built up in recent months.