As Pakistan moves into the second half of FY2025, the government remains focused on achieving the economic targets necessary to sustain recovery and drive growth. To meet these objectives, the government is working diligently to support farmers and ensure the successful production of key crops. However, weather conditions remain a critical factor, as below-normal rainfall could lead to water stress, particularly in rain-fed agricultural zones. This is especially concerning for Rabi crops like wheat and barley, which are in their crucial emerging stage. The government’s attention to these agricultural challenges is vital for ensuring that the sector continues to contribute to the economy’s broader recovery.
On the industrial front, while some sectors remain in negative territory, the overall resilience of the economy is evident in the robust performance of key industries. Large-Scale Manufacturing (LSM) showed positive growth in October, driven by high-weighted sectors that continue to lead the charge. Notably, the automobile and cement industries saw strong performances in November 2024, providing critical support to their allied sectors and contributing to the overall economic recovery. The interconnectedness of these industries is expected to create a ripple effect, driving broader growth across the economy.
The easing of monetary policy in December 2024 is expected to further stimulate economic activity. The recent reduction in the policy rate has already begun to have a positive impact, with rising demand for credit, particularly from the private sector. This signals growing confidence in Pakistan’s economic prospects, and the momentum generated by these favorable conditions is expected to accelerate in the coming months. Higher production levels and increased economic output are anticipated, further contributing to the positive outlook for FY2025.
Externally, Pakistan’s economic stability is expected to hold steady, supported by strong remittance and export inflows, along with a controlled level of imports. The balance of trade should remain relatively stable, contributing to overall economic stability. Furthermore, exchange rate stability and contained inflation are expected to continue, with inflation anticipated to remain within the range of 4.0-5.0 percent for December 2024. This favorable inflation outlook is a key element in maintaining the purchasing power of consumers and ensuring sustained growth across various sectors.
The fiscal performance of the government during the July-October period has been encouraging, driven by higher revenues and prudent expenditure management. This strong fiscal performance is expected to create the necessary fiscal space for increased development spending, which will further support sustainable economic growth in the long term. The government’s focus on improving fiscal stability, coupled with the supportive macroeconomic environment, positions Pakistan well for continued progress toward its economic goals for FY2025.
In summary, while challenges remain in certain sectors, Pakistan’s economic outlook for FY2025 remains positive, driven by strong industrial performance, favorable external factors, and prudent fiscal policies. The government’s commitment to addressing agricultural challenges and supporting key industries is expected to reinforce the country’s economic recovery and pave the way for further growth in the months ahead.