GDP growth forecasted at mere 2.44%
Listen to article
Pakistan's economy continues to face challenges in achieving meaningful growth, with projections for the fiscal year 2024-25 indicating a slow recovery.
According to estimates from the Lahore School of Economics Modelling Lab, GDP growth is expected to reach only 2.44%, reflecting a slight improvement from the 1.7% growth recorded in the previous fiscal year but still remaining below par.
These projections broadly align with official figures, including a recent revision by the Pakistan Bureau of Statistics, which lowered its Q3 GDP growth estimate from 2.7% to 2.4%. While international institutions such as the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB) have provided slightly higher projections ranging from 2.5% to 2.7%, the overall picture still reflects a sluggish economic recovery.
One of the main reasons for the weak growth outlook is the poor performance in key productive sectors, particularly manufacturing and agriculture. Large-Scale Manufacturing (LSM), which should ideally be a driving force for GDP growth, has contracted by 1.9% during the current fiscal year. This continues a trend of stagnation and decline observed over the past two years. In the absence of manufacturing growth, the economy has had to rely heavily on agriculture. However, the agricultural sector has also underperformed, growing at just 0.56%only a quarter of its historical trend rate.
The disappointing agricultural growth is largely due to a significant contraction in the production of major crops. Wheat production has dropped by 9%, from 32 million tonnes to 29 million tonnes, while maize has declined by 15%, from 10 million tonnes to 8 million tonnes. Sugarcane production fell by 4%, and rice saw a marginal decrease of 1.4%.
Cotton suffered the sharpest fall, contracting by 31%, with output reducing from 10 million to 7 million bales. Analysts argue that this sharp decline cannot be blamed on weather patterns, which have remained consistent. Instead, they attribute the drop to government policy changesmost notably, the removal of long-standing support prices for key crops, a decision that has likely discouraged production.
Furthermore, the Pakistan Bureau of Statistics (PBS) measures these crop contractions only in terms of volume, not monetary value. This may result in an underestimation of the actual impact on GDP. For instance, the price of wheat has declined by about Rs1,000 per 40 kg compared to the previous season, reducing the overall value of wheat production by nearly 25%. This translates to significant income losses for farmers and suggests that the real contraction in the agricultural sector could be even worse than officially reported.
On the inflation front, the situation has improved compared to previous years, but it still remains a concern. Inflation for FY202425 is projected at 8.37% by the Lahore School's model, higher than the government's upper-end estimate of 7.5% and significantly above the IMF's estimate of 5.1%. The major driver of high inflation in recent years has been the depreciation of the exchange rate, which has now somewhat stabilised due to more effective monetary policies and intervention by the State Bank of Pakistan (SBP).
However, energy prices remain a key contributor to inflation. It is estimated that they add around 4% to the inflation rate, primarily due to increased government taxes rather than higher supplier costs.
There has been a trade-off between taming inflation and stimulating growth. The current low inflation has come at the cost of stifling agriculture, the only productive sector showing some promise in the absence of manufacturing growth. Experts warn that while bringing inflation down is important, it should not come at the cost of agricultural output, especially when manufacturing is already in decline.
Another structural challenge remains the current account deficit, which has long constrained Pakistan's GDP growth. Historical data show that whenever GDP growth exceeds 5%, the current account deficit tends to widen sharply due to increased imports, which are highly sensitive to economic growth. While remittances provide temporary relief, they are not a sustainable solution. With global trade becoming more volatile due to tariff wars and changing regulations, the potential for export-led growth appears to be diminishing.
One proposed solution is to focus on investment-led growth by liberalising the import of investment goods. This would allow domestic industries to upgrade their capabilities and drive growth, provided that non-essential consumption imports are controlled to maintain current account balance.
Overall, the outlook for Pakistan's economy remains cautious. While inflation is being brought under control, the country has yet to find a solid path to sustainable and inclusive growth. Both manufacturing and agriculture need policy support, and investment strategies must be realigned to address structural weaknesses in the economy, the LSE Modelling Lab added.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
42 minutes ago
- Express Tribune
Animal sacrifice hits hard amid skyrocketing prices this Eid
Dealers of sacrificial animals have been ordered by Multan admin to sell only in designated areas. PHOTO: FILE As Lahore observes Eid-ul-Adha today, the focus has shifted from bustling cattle markets to the traditional sacrifices that mark the festival. However, many citizens are expressing concern over the soaring cost of livestock and the ineffective enforcement of price and safety regulations. In the days leading up to Eid, cattle markets across the city were packed with buyers and animals arriving from regions such as South Punjab. Yet despite the festive spirit, shoppers were left frustrated by what they say were unjustified price hikes. "A calf or bull that cost between Rs150,000 and Rs250,000 last year is now being sold for Rs350,000 to Rs500,000," said Muhammad Hanif, a buyer at the Shahpur Kanjran Cattle Market. "Even goats and sheep are priced as high as Rs250,000 to Rs300,000." Kamran Bhatti, a resident of Valencia Town, echoed the sentiment. "There's no pricing mechanism at all. Sellers are quoting whatever they wantsome are demanding up to a million rupees for a pair of small animals," he said. "The government should promote local breeding and invest in livestock farming to stabilise the market and generate employment." Livestock traders, however, blamed the increased prices on rising operational costs. "We're not overchargingour own costs have gone up significantly," said Sadaqat Ali, a trader who brought animals from Multan. "High fuel prices, transport expenses, and labour wages have pushed up our overheads. If the government addresses these issues, livestock prices will automatically come down." To ensure organised and hygienic trading, the Lahore district administration established six official cattle markets. In addition to the permanent market at Shahpur Kanjran, five temporary facilities were set up at key locations across the city, including Haveli Markaz near Spring Mill (Raiwind zone), the Sports Complex near Adda Rakh Chabeel (Wahga zone), LDA City on Defence Road (Nishtar zone), Mouza Nain Sukh near Saggian Bridge (Ravi zone), and Burki Road near Paragon City (Cantonment zone). In a bid to maintain public order and sanitation, the Punjab government also imposed Section 144 across the province from June 5 to June 11.
Express Tribune
20 hours ago
- Express Tribune
Sacrifice pool prices rise in line with animal costs
The cost of each share of collective or pool sacrifice has also increased with the hike in the price of the sacrificial animals. Bulls, cows and camels have seven shares in sacrifice for the Eidul Azha. While many households buy their own animals and distribute the share among family and friends, others choose to pool the sacrifice with local mosques or welfare organisations to fulfil the religious obligation. Due to the high cost of sacrificial animals, it is becoming difficult for many people to perform the Sunnah of Ibrahim on an individual level. That is why there has been an increase in the trend of collective sacrifice on Eidul Azha in Karachi this year. Imran-ul-Haq, the administrator of a welfare organisation that conducts collective sacrifices, informed The Express Tribune that sacrificial animals are being sold at exorbitantly high prices this year. He said that people who bought a heifer for less than Rs100,000 and a goat for around Rs30,000 last year, have found it difficult to sacrifice individually this Eidul Azha. That is why a large number of citizens are opting for collective sacrifice. He said that due to the high cost of animals, the share of collective sacrifice has also increased from Rs3,000 to Rs10,000. He said that various madaris, mosques and welfare organisations have introduced various packages of collective sacrifice. The share which was Rs20,000 to Rs25,000 or less last year has increased to Rs28,000 or more this year.
Express Tribune
20 hours ago
- Express Tribune
WB readjusts poverty line in Pakistan at 44.7%
Listen to article The World Bank has adjusted upward the income levels in an effort to measure global poverty, which has also pushed the percentage of Pakistanis living in poverty by to 44.7% — an outcome that may not still be fully reflecting the harsh ground realities due to the use of seven years old survey data. The Washington-based lender on Thursday released its new international poverty line to reflect changes in the prices of goods and services and their implications on the global population. The new poverty line for Pakistan, which is a lower middle-income country, is set at $4.20 per person per day, up from $3.65, said Christina Wieser, the senior poverty economist of the World Bank while briefing the media persons here. She said that due to the upward revision, for the lower middle income level, the poverty ratio has jumped from 39.8% of the old level to 44.7% on the threshold of $4.20 per day income. The World Bank has also updated the extreme poverty line from $2.15 to $3 per person per day. Because of the revision in the threshold, 16.5% of the Pakistani population lives in extreme poverty, up from 4.9% under the previous $2.15 threshold, said Christina. She said that one of the reasons for such a high jump was that the majority of the people were clustered around $2.15 to $3 per day income level, which resulted into a significant surge. About 82% of this increase in extreme poverty is due to the higher value of the new international poverty line reflecting increases in the national poverty lines of comparator countries, with the rest explained by price increases in Pakistan between 2017 and 2021, according to the World Bank. The World Bank has not used the latest population census data and instead relied on the United Nations population dataset. Christina also added that the underlying Household Income and Expenditure Survey (HIES) 2018/19 data has been used for both national and international estimates. While international poverty lines are essential for tracking global progress and comparisons, national lines remain more appropriate for informing country-specific policy decisions, said the senior economist. Anything that has affected since 2019 is not included in either Covid-19 or 2022 floods, as the baseline remains the same, said Christina while responding to a question. We are desperately looking forward to the new household integrated economic survey to update our baseline, she added. The local economists had estimated a sharp rise in poverty after the 2022 floods, which inundated one-fourth of the country and adversely impacted populations in three provinces. These updates to the international poverty lines ensure that poverty estimates remain accurate and comparable across countries. The methodology remains consistent with past updates, continuing a practice that began with the introduction of the dollar-a-day line in 1990, according to the World Bank economist. "The revisions help position Pakistan's poverty levels in a global context and underscore the importance of continued efforts to reduce vulnerability and improve resilience," said Najy Benhassine, the outgoing World Bank Country Director for Pakistan. For domestic policy and programme targeting, the national poverty line remains unchanged and continues to serve as the primary benchmark for assessing poverty within Pakistan, Christina said. The forthcoming World Bank Poverty, Equity, and Resilience Assessment for Pakistan will provide critical context for interpreting these updated poverty estimates, she added. The report would offer a detailed update on poverty, inequality, and non-monetary outcomes, will investigate key drivers of poverty, and outline a forward-looking agenda to enhance prosperity and resilience for all Pakistanis. According to the government's last official available numbers, which are based on the 2018-19 survey, 21.9% of the population was living below the national poverty line. However, because national poverty lines differ widely, the resulting poverty rates are not comparable internationally. The need for new international poverty lines arises from the evolving price levels and cost of basic needs across the world and within income groups, according to Christina Wieser. To maintain accurate global comparisons, the World Bank periodically updates these poverty lines. International poverty estimates are based on the headcount of people with consumption below the international poverty line, defined in purchasing power parities (PPPs). Pakistan is among the countries experiencing the largest changes in poverty when transitioning to the 2021 PPPs based on the Low-Income International Poverty Line, according to the World Bank. The World Bank said that the international poverty line should be used only for cross-country comparison and analysis; for evaluating poverty in a particular country (Pakistan), the national poverty line remains the appropriate standard. The revisions help position Pakistan's poverty levels in a global context and underscore the importance of continued efforts to reduce vulnerability and improve resilience, The new figures reflect updated international thresholds and improved data from other countries, not deterioration in living standards, according to Christina.
