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An overview of shifts in economic indicators in 2024

Ibraheem Sohail

Dec 30

2024 was undoubtedly a turbulent year for Pakistan, beset by political uncertainty and terrorism. These factors undoubtedly harmed the economy, making it imperative to study key economic indicators to assess the direction in which Pakistan is headed.

 

Pakistan’s Gross Domestic Product (GDP) skyrocketed from $337.46 billion to $374.6 billion. This remarkable rise can be attributed to various factors, including a low inflation rate, increased domestic consumption levels, and good governance.

 

In the preceding year, 2023, the economy was in shambles as it shrank by 0.2 per cent. However, statistics from the International Monetary Fund (IMF) suggest that the real GDP growth rate for 2024 stood at a respectable 2.4 percent.

 

While this is lower than the regional average of 6.4 percent, as per the World Bank, it is still a remarkable feat for Pakistan. This is because lawmakers in Islamabad successfully lifted the economy out of its downward spiral.

 

GDP per capita also recovered slightly in 2024 to reach $1,590. This rise in GDP per capita reflects an 8.9 percent growth rate in absolute terms. While this could be lauded as a victory for Islamabad, it is to be noted that GDP per capita levels are still lower than they were in 2022, after which the economy shrank.

 

It is worth noting that the unemployment rate in Pakistan shrank by over six percent and settled at eight percent despite the increase in the working-age population in the preceding year. The reasoning behind this could very well be the lower per capita income levels discussed earlier.

 

Comparing the economy this year to the recent peak experienced in 2022 has several implications for the labour market. The falling unemployment rate could be attributed to the drop in per capita incomes.

 

This is because employers may find it more economical to rely on labour as it can be procured in a relatively cheaper manner, causing an excessive demand for cheap labour. International investors could then invest in the economy to exploit lower wages in Pakistan and earn higher profits.

 

This explanation makes sense as billions of dollars have been poured into Pakistan, especially around the Shanghai Cooperation Summit. Agreements with Saudi Arabia alone brought in over two billion dollars in investments.

 

As for the rise between 2023-24, experts are posing an explanation that can be derived from the principles of economics. Many workers who were not willing to supply their labour at the low levels of income in the preceding year entered the market as employers bid wages up. Statistics from Trading Economics support this argument as the minimum wage rose from 32,000 to 37000 rupees in the past year.

 

Pakistan’s current account deficit shrank from $3.27 billion to just under a billion. This trend is largely a result of the drop in international crude oil prices, which averaged around $70 per barrel, compared to last year's higher average of $80 per barrel.

 

The drop is a result of Pakistan's historical reliance on crude oil imports, stemming from a lack of local supply. Petroleum-related entries on the import bill run as high as 17 billion dollars annually, according to the Observatory of Economic Complexity.

 

It is in the interest of Pakistanis that economic recovery continues into the next year. If Pakistan posts up growth rates as it has this year, it could successfully complete its recovery. Businesses in Pakistan will welcome such a change as international investors are keen on investing in economies that aren’t going through recessions.

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