Amid government’s claims of the economy being on the right track, World Economic Situation – an economic survey conducted by the Department of Economic and Social Affairs (DESA) at the United Nations (UN) – has projected Pakistan’s Gross Domestic Product (GDP) to grow by a modest 3.4 percent in 2025.

 

While seemingly low, the projected growth rate is impressive as the country continues to recover after the economic slowdown it underwent in 2022-23.

 

According to reports, the International Monetary Fund’s (IMF) $7 billion Extended Fund Facility (EFF) builds on the progress that was made under 2023’s EFF. Islamabad, in collaboration with IMF officials, is attempting to introduce structural reforms to help Pakistan escape the economic quagmire it finds itself bogged down in.

 

The government has managed to stabilise the economy and pull it out of the downward spiral it found itself in at the end of 2023 when, according to Trading Economics, the economy shrank by approximately 0.2 percent.

 

It is pertinent to note that Islamabad has managed to support the economy’s growth despite austerity measures proposed by the IMF. The global lender’s recent loan package requires that Pakistan create an environment that addresses chronic structural issues while supporting economic revival.

 

The UN’s survey highlighted that Pakistan’s work towards reforming state-owned enterprises, rebuilding policy credibility and attempts to boost competitiveness is in line with the IMF’s conditions and reflects the recent efforts of the federal government as well.

 

Islamabad has also made the decision to suspend subsidies and end support pricing for crops in a move to bolster competitiveness in the economy.

 

The federal government has actively been trying to privatise loss making publicly owned companies such as the Pakistan International Airlines (PIA). However, it has been unable to find success in its efforts as investors are not interested in purchasing publicly-owned companies due to structural issues plaguing them.

 

The survey also revealed that Pakistan will still considerably lag behind its counterparts in South Asia in the coming years as South Asia’s regional GDP is expected to rise by approximately 5.7 percent and 6 percent in 2025 and 2026, respectively.

 

The reason behind the high regional growth rate can be attributed to India, Nepal and Bhutan, all of which have displayed robust growth rates in recent years. The survey also reported that consumer price inflation in South Asia could fall from 9.9 percent in 2024 to just 8.3 percent in 2025.

 

Aside from Bangladesh, inflation rates have dropped in all South Asian countries, the survey said.

 

It merits a mention that the drop in inflation rates in Pakistan were made possible through the State Bank of Pakistan’s (SBP) contractionary monetary policy. With inflation in control and the SBP slashing interest rates, the economy is on track to recover as businesses utilize cheaper loans to fuel expansion plans.