World Bank Upgrades Pakistan’s Growth Forecast to 2.8% for FY25

The World Bank has revised Pakistan’s economic growth forecast to 2.8 percent in the fiscal year 2024-25 and 3.2 percent in FY26. In its latest Global Economic Prospects report, the Bank attributed the improvement to slowing inflation, higher industrial activity, and reduced political uncertainty. Growth for FY24 was estimated at 2.5 percent, driven by improved agricultural output due to favorable weather and increased industrial production following the lifting of import restrictions. Headline inflation in Pakistan dropped to single digits in August 2024 for the first time since late 2021, primarily due to tight fiscal and monetary policies. In response to waning inflationary pressures, the central bank began cutting policy rates. The report, however, highlighted ongoing challenges, noting that fiscal and monetary policies would remain restrictive, keeping growth below potential. Per capita income growth in Pakistan, along with Bangladesh and Sri Lanka, is expected to lag behind pre-pandemic levels, slowing poverty reduction and limiting income convergence with higher-income economies. Regionally, growth in South Asia, excluding India, rose to 3.9 percent in 2024 from 3 percent in 2023, supported by economic recoveries in Pakistan and Sri Lanka. While food insecurity has moderated in some countries, it remains worse than pre-pandemic levels in Afghanistan and Pakistan, the report noted.