World Bank raises Pakistan’s GDP growth forecast to 2.8% for FY25

The World Bank has projected that Pakistan’s economic activity will keep getting better with GDP growth to hit 2.8 per cent in FY25, slightly up from the previous projection of 2.3 per cent.

These insights were mentioned in a report named Pakistan Development Update: The Dynamics of Power Sector Distribution Reforms.

The report mentions several positive factors for Pakistan’s economy, including the removal of import restrictions, easing of domestic supply chain disruptions, and falling inflation ratings.

Also, business confidence is likely to improve with upgrades in Pakistan’s credit rating and lesser political uncertainty.

Pakistan’s agriculture sector is also projected to grow at average rate of 2.4 per cent during FY25–26. The World Bank said that the absence of import controls will enhance the availability of farm inputs, which will support recovery in agricultural sector over the medium term.

The report also predicts that growth in agriculture and industry will benefit the services sector, which is projected to grow by an average of 3.2 per cent during FY25–26.

This growth will be led by key sub-sectors including wholesale and retail trade, along wit transport and storage, which are expected to recover with the revival of imports and surging demand.

Output growth is forecasted to drop to 3.2 per cent in FY26 due to stricter macroeconomic policies, high inflation, and lingering policy uncertainties.

On the inflation front, the World Bank expects consumer price inflation around 11.1 per cent in FY25, slowing further to 9 per cent in FY26, driven by lower commodity prices, tight macroeconomic policies, and high base effects.

Still, inflation is expected to remain high in the short term due to increasing energy prices, an increase in money supply through open market operations (OMOs), and new tax measures as a part of ongoing fiscal consolidation efforts.

Externally, Pakistan’s current account deficit is also expected to remain low at 0.6 per cent of GDP in FY25, inching up slightly to 0.7 per cent in FY26, as local demand improves and import restrictions remain lifted.