Pakistan Economic Forecast

After nearly grinding to a halt in the last fiscal year, which ended in June, the economy appears to be recovering in the present fiscal year. That said, the recovery appears to have had a slow start. The government agreed to a USD 3 billion bailout with the IMF in July, thus avoiding a balance of payments crisis. But to get the funds, it has had cut electricity and fuel subsidies, stoking inflation and therefore stymieing private spending; in July–October, monthly business activity worsened, and business and consumer sentiment were pessimistic. In addition, expensive energy and a dollar shortage caused industrial production to stagnate year on year in July–September. That said, inflation eased substantially in October, suggesting private spending will be slowly recovering. Consumer and business sentiment surged in October, and the stock exchange hit a record high in early November.

Inflation fell to 26.9% in October from 31.4% in September after the government cut gasoline prices by roughly 10%. Our panelists see inflation decelerating in CY 2024 from CY 2023 thanks to recent belt-tightening by the Central Bank and government. However, a recent sharp hike in gas prices, which are set by the government, will help keep inflation high.