Pakistan’s economic outlook uncertain with high risks on the downside: ADB

The Asian Development Bank (ADB) has said that Pakistan’s economic outlook remains uncertain with high risks on the downside.

“Political uncertainty that affects macroeconomic policy-making will remain a key risk to the sustainability of stabilisation and reform efforts,” ADB said.

On the external front, potential supply chain disruptions from the escalation of the conflict in the Middle East would weigh on the economy. With Pakistan’s large external financing requirements and weak external buffers, disbursement from multilateral and bilateral partners remains crucial. However, these inflows could be hampered by lapses in policy implementation, ADB said in its outlook.

Further IMF support for a medium-term reform agenda would considerably improve the market sentiment and catalyse affordable external financing from other sources, ADB said.

The ADB also said that Pakistan’s growth is projected to remain subdued in FY2024 and pick up in FY2025, provided economic reforms take effect. Real GDP is projected to grow by 1.9 per cent in FY2024, driven by a rebound in private sector investment linked to progress on reform measures and transition to a new and more stable government.

Pakistan’s economy shrank as floods, political uncertainty, and disrupted external support caused public investment to plunge and private investment and industry to contract. Inflation reached a five-decade high as supply disruption and currency depreciation propelled increases in food and energy prices, ADB said.