ISLAMABAD: The Finance Division stated that with strengthened economic fundamentals, declining inflation, and growing investors’ confidence, Pakistan is well-positioned for continued growth momentum throughout fiscal year 2025.
The division, in its State of Pakistan’s Economy half yearly report, stated that inflation is expected to stabilise near the long-term average of seven per cent in the coming quarters, fostering conditions conducive to economic activity.
This anticipated stability will likely facilitate further reduction in policy rates, lowering borrowing costs for both businesses and consumers.
UN projects Pakistan’s GDP growth at 3.4% in 2025, inflation to be in double digits
Such a shift is expected to boost investment and economic momentum, particularly in LSM and services, which are key growth drivers this year.
The division admitted that in quarter 1 (Q1) fiscal year 2025, GDP growth was estimated at 0.9 per cent compared to 2.3 per cent in the same quarter of 2024 on the back of 1.15 per cent growth in agriculture, and 1.43 per cent growth in services. In the industrial sector, the growth remained negative.
However, the rate of contraction slowed down to -1.03 per cent from -4.43 per cent last year signalling gradual improvement, it added.
The economic recovery achieved in fiscal year 2024, with GDP growth rate of 2.5 per cent against a contraction of 0.2 per cent in fiscal year 2023, has sustained positive growth of 0.92 per cent in the first quarter of fiscal year 2025. However, growth has slowed compared to the 2.3 per cent recorded last year, reflecting moderation across key sectors, particularly in agriculture.
The slower growth in agriculture is primarily due to the high base effect in the crop sector of the last fiscal year and the decline in the crop production of cotton, rice, sugarcane, and maize. However, the textile sector, wholesale, retail trade are gradually accelerating and impacting other related sectors positively.
Agriculture has shown a growth of 1.15 per cent in Q1 as compared to 8.09 per cent in the same period last year.
The growth in important crops contracted by 11.19 per cent in Q1 due to the high base effect in the crop sector of the last fiscal year and the decline in the crop production of cotton (-29.6 per cent), rice (-1.2 per cent), sugarcane (-2.2 per cent) and maize (-15.6 per cent).
Although important crops comprise wheat, cotton, rice, maize, and sugarcane; however, in Q1 there is no impact from wheat as it is neither sown nor harvested during this quarter. Other crops have witnessed 2.08 per cent growth in Q1 as compared to -2.08 per cent last year.
Livestock has increased by 4.89 per cent as compared to 4.56 per cent last year because of a decrease in inputs (dry fodder). Forestry and fishing have retained their normal growth tendency and witnessed modest growth of 0.78 per cent and 0.82 per cent, respectively.
In Q1-FY2025, the industrial sector contracted by 1.03 per cent, showing improvement compared to a substantial contraction of 4.43 per cent in the same period last year. This
Recovery was largely attributed to growth in manufacturing, as well as, electricity, gas, and water supply.
However, downside risks persist in mining and quarrying, which declined by 6.49 per cent, and construction, which contracted significantly by 14.91 per cent.
During Jul-Nov FY2025, the LSM sector experienced a slight decline of 1.25 per cent, compared to the contraction of 1.9 per cent.
In November 2024, LSM witnessed a contraction of 3.81 per cent on YoY basis and 1.19 per cent on MoM basis.
Copyright Business Recorder, 2025
Comments