ADB Raises Pakistan’s Growth Forecast to 3% for FY25

ADB Raises Pakistan’s Growth Forecast to 3% for FY25

ISLAMABAD: An article from the Asian Development Bank (ADB) recently changed its prediction for Pakistan’s growth to 3.0% during the fiscal year 2024-25. This is up from 2.8% in September 2024.

The report says that more stable macroeconomics will help the recovery after the new International Monetary Fund (IMF) scheme under the Extended Fund Facility is approved.

It also says that industrial output growth will speed up once import management measures are lifted, investor trust rises, and foreign exchange becomes easier to obtain.

Because inflationary pressures have been easing faster than predicted, monetary policy has become more flexible. This should help the economy even more by encouraging private investment to rise again.

However, farm growth is expected to slow down because of the heavy monsoon rains from July to September 2024, making parts of the country flood-like.Two of the country’s five main crops, wheat and cotton, are expected to do badly in FY25.The Asian Development Outlook (ADO) for December 2024 also changed the growth estimate for FY2024 to 2.5%, the same as the new government estimate.The growth predictions for South Asia have been lowered to 5.9% in 2024 and 6.3% in 2025. India’s slower-than-expected growth in the second quarter was mainly blamed for the lower 2024 prediction. The manufacturing sector’s poor performance and the government’s slow spending caused the growth to be lower than expected.

Pakistan and Sri Lanka’s growth predictions have been raised because they are recovering from the macroeconomic problems they faced in 2022 and 2023. However, Bangladesh and the Maldives’ growth predictions have been lowered, which makes the 2024 picture even worse.The growth predictions for the last two economies have also been lowered for 2025. This is because the political unrest in Bangladesh in July and August 2024 and the steps to tighten the government’s finances in the Maldives are still having an effect.Nepal’s growth is also likely to slow down in 2025 compared to earlier predictions.

The study says that growth in developing Asia will slow to 4.9% in 2024 and 4.8% in 2025. Most changes to growth predictions for 2024 for different economies and sub-regions are based on new statistics.The downward revisions to East Asia and South Asia offset the stronger growth in the Caucasus, Central Asia, and Southeast Asia, shaving 0.1% from the region’s growth.South Asia is expected to experience slower growth in 2025 because domestic demand is likely to be lower. In the meantime, growth in developing Asia is still strong, but the new US government promises significant changes.

In most of the area, domestic demand is still high, and exports are still helping the economy grow, though the pace of growth has slowed.As we discussed in the report’s Special Topic, the new Trump government plans to make major policy changes that will affect the region.The effects will be felt longer than this ADO’s forecast period, but growth predictions for 2024–2025 haven’t changed much since September. Downside risks remain, such as US policy changes happening faster and more significant than expected, geopolitical tensions worsening, and the PRC property market weakening.