Pakistan’s economy is expected to regain momentum in the second half of the current fiscal year, according to the State Bank of Pakistan (SBP), despite ongoing challenges in the agriculture sector.
In its half-yearly report for 2024-25, published on Monday, the SBP noted that improvements in manufacturing, services, and external trade are providing a more optimistic outlook. The economy grew by 1.5 per cent during the first six months of the fiscal year, compared to 2.1 per cent in the same period last year.
“While growth slowed in the first half of FY25 compared to a year earlier, recent data from high-frequency indicators suggest that economic activity is picking up,” the central bank said in its report, The State of Pakistan’s Economy.
The report highlighted that key sectors are showing signs of steady recovery, supported by easing financial conditions and a decline in global energy prices. The Purchasing Managers’ Index (PMI), a measure of manufacturing performance, rose to 53.0 in February 2025 — its highest level since August 2022.
Domestic demand also improved, with sales of automobiles, cement, and petroleum products increasing. High value-added textile exports maintained their growth trajectory, indicating a strengthening of industrial and services sectors.
However, the agriculture sector continues to underperform. The SBP warned that a lower-than-expected wheat harvest could weigh on overall economic growth. Consequently, the real GDP growth forecast for the year remains between 2.5 and 3.5 per cent, with risks tilted towards the downside.
Fiscal performance showed some improvement in the first half, supported by profit transfers from the central bank and restrained subsidy spending. Still, the fiscal deficit projection remains between 5.5 and 6.5 per cent of GDP, with concerns over possible revenue shortfalls persisting.
Inflation has eased sharply. With falling global and domestic commodity prices and the fading impact of a high base effect, the SBP revised its average inflation forecast for FY25 to 5.5–7.5 per cent, down from the previous estimate of 11.5–13.5 per cent. The central bank expects inflationary pressures to stay contained in the near term, helped by current fiscal and monetary policies and adequate food supplies.
On the external front, the current account balance is projected between -0.5 and 0.5 per cent of GDP. This improvement is driven by stronger remittance inflows, lower global commodity prices, and ongoing export growth. However, the SBP cautioned that rising imports, spurred by increasing industrial demand, could leave the economy vulnerable to a renewed surge in global prices.
The SBP also flagged external risks to Pakistan’s economic outlook. It pointed to the threat of rising global protectionism, persistent geopolitical tensions, and the possible return of global inflation caused by supply chain disruptions and tariff-related cost increases.
While non-agricultural sectors are showing signs of recovery, the SBP stressed that sustaining this progress will depend heavily on careful policy management and global economic developments.
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