Pakistan’s GDP expands by 0.92% in the first quarter of FY25

Pakistan's Gross Domestic Product (GDP) expanded by 0.92% in the first quarter of the fiscal year 2025 compared to the same period last year, driven primarily by the services and agriculture sectors.

According to the Pakistan Bureau of Statistics (PBS), the services sector posted a growth of 1.43%, while the agriculture sector grew by 1.15%, contributing significantly to the overall economic expansion.

However, the industrial sector experienced a decline of 1.03%, partially offsetting the gains made by services and agriculture.

An analyst at Ismail Iqbal Securities noted in a report that Pakistan's IMF-driven reforms are tackling crucial issues such as circular debt and governance inefficiencies, building a strong foundation for future growth.

“The political stability, along with easing inflation and falling interest rates, restores investor confidence and provides the certainty needed for consistent economic progress.”

Agriculture grew by 1.15%, thanks to a 4.89% increase in livestock and 2.08% growth in other crops, despite an 11.19% contraction in important crops. Major crops like cotton, maize, rice, and sugarcane saw declines.

Industry contracted by 1.03% in 1QFY25 due to a 6.49% fall in mining and quarrying and a 0.82% decline in large-scale manufacturing.

Crude oil, gas, and coal production decreased significantly. The construction industry also shrank by 14.91%, while the electricity, gas, and water supply industry grew by 0.58%.

Services grew by 1.43%, led by increases in human health & social work activities (5.6%) and information and communication (5.09%). Accommodation & food services and wholesale and retail trade also posted growth.

Besides, FY24 GDP growth was revised down to 2.5% from 2.52%, mainly due to lower agriculture growth and a higher contraction in the industrial sector.

The Ministry of Finance noted in a recent report that improved fiscal performance, driven by higher revenues and prudent expenditure management, is expected to create fiscal space for development spending and support sustainable economic growth.

The easing of monetary policy is also anticipated to stimulate economic activity. Since June 2024, Pakistan has seen a downward trend in policy interest rates, dropping from a high of 22% in June to 13%.

Notably, the inflation rate fell to 4.9% in November 2024, the lowest since April 2018, and is expected to ease further in December.

Further, for Rabi 2024-25, the government has set a wheat production target of 27.920 million tons from an area of 9.262 million hectares.

Agriculture credit disbursement reached PKR 925.7 billion during July-November FY25, an increase of 8.5% compared to PKR 853 billion during the same period last year.

Pakistan's technology exports increased by 25% in November, reaching $324 million compared to the same month last year. The technology sector now contributes 48% to the overall services industry.

The diverse performance across different sectors contributed to the 7% growth in total services exports.

Analysts expect Pakistan GDP to grow at 2.5-3.0% in FY25. Recently, Asian Development Bank revised up Pakistan GDP forecast to 3% for FY25 from earlier 2.8%.

Country’s central bank in recent monetary policy statement mentioned that real GDP growth in FY25 to remain in the upper half of the projected range of 2.5-3.5%.