Pakistan’s GDP growth is expected to reach 3.2% in the fiscal year FY2024-25, according to a report by BMI, a Fitch Solutions company. This forecast slightly misses the government’s target of 3.6% growth for the year.
The report, titled ‘Pakistan Country Risk Report’, expresses optimism about Pakistan’s economic prospects, citing three main reasons for its positive outlook. Firstly, it anticipates a recovery in the agriculture sector, crucial for Pakistan’s economy, following disruptions caused by floods in 2023. The report notes that despite challenges, grain production rebounded in 2024, although cotton production is expected to decline slightly in 2025.
Secondly, the report predicts a significant easing of inflation, attributing it partly to improved agricultural output. It expects inflation to drop from 11.8% year-on-year in May 2024 to 6.2% by December 2024, which could support consumer spending.
Thirdly, BMI forecasts policy easing by the State Bank of Pakistan, with a reduction in the key policy rate from 20.5% in June 2024 to 14.00% by December 2025. However, it cautions that fiscal policy may continue to tighten despite these monetary measures.
The report also highlights risks to Pakistan’s economy, including its vulnerability to external shocks like floods or droughts, given that a significant portion of the population relies on agriculture. It also notes political uncertainties that could potentially disrupt the country’s economic recovery.
Overall, while there are optimistic indicators for Pakistan’s economic growth in FY2024-25, the report underscores the importance of managing these risks and uncertainties effectively.
