Downward revision: ADB sees Pakistan’s GDP growth to ‘recover modestly’ to 1.9% in FY24

Pakistan’s gross domestic product (GDP) growth is projected to recover modestly to 1.9% in fiscal year 2023-24 from 0.3% in FY2023, with price pressures remaining elevated, the Asian Development Bank (ADB) said in a report on Wednesday.

The outlook has been revised slightly downwards from the 2% growth rate it saw in April.

However, the ADB also warned that significant downside risks to Pakistan’s economic outlook in FY24 remain, including from global price shocks and slower global growth.

According to the Asian Development Outlook (ADO) September 2023, Pakistan’s adherence to an economic adjustment programme through April 2024 will be critical to restoring macroeconomic stability and the gradual recovery of the country’s growth.

“Pakistan’s economic prospects are closely tied to the steadfast and consistent implementation of policy reforms to stabilize the economy and rebuild fiscal and external buffers,” said ADB Country Director for Pakistan Yong Ye.

ADB expects inflation in Pakistan to ease to 25% in FY2024 from 29.2% in FY2023

“Greater fiscal discipline, a market-determined exchange rate, and speedier progress on reforms in the energy sector and state-owned enterprises are key to reviving economic growth and protecting social and development spending.”

In FY23, Pakistan’s economy remained engulfed in various challenges including severe floods, global price shocks, and political instability, causing growth to weaken and inflation to rise.

As per the ADO, the implementation of the economic adjustment programme and a smooth general election in FY2024 are expected to boost confidence, while easing import controls is likely to support investment.

“Favorable weather conditions and the government’s relief package of free seeds, subsidised credit, and fertilisers are expected to support a recovery in agriculture. This, in turn, will help the industry, which will also benefit from the increased availability of critical imports,” the report said.

ADB expects inflation in Pakistan to ease to 25% in FY2024 from 29.2% in FY2023, as base-year effects set in, food supply normalises, and inflation expectations moderate.

“However, sharp increases in energy tariffs under the economic adjustment programme, and the continued weakening of the rupee will keep inflationary pressures elevated,” it noted.