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SawBank > Blog > Economics > Pakistan Economic Growth: An In-Depth Analysis
Economics

Pakistan Economic Growth: An In-Depth Analysis

quickrentpk
Last updated: March 14, 2025 6:36 pm
quickrentpk
Published: June 1, 2024
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Analyzing GDP growth rates, one can illustrate that the economic growth of Pakistan has a rich and diverse character. However, its development path has been quite unpredictable and unbalanced throughout the years for a country that claims to have a youthful population, numerous resources, and a strategic position. As comprehensively mentioned, there are some positive signs of macroeconomic stability in the regional economy, but problems like high inflation rates and infrastructure constraints persist.

Contents
Current Economic SituationPolitical Instability and Economic StrugglesEconomic Growth ForecastsGender Disparity and Financial InclusionManufacturing and TradeInfrastructure and EnergySocial and Political IndicatorsPoverty and UnemploymentExternal Debt and Currency DepreciationRecommendations for GrowthConclusion

Current Economic Situation

On the economic aspect, the current situation of Pakistan’s economy is staggering because there is no sign of growth, and inflation rates are also soaring highs. Inflation reached 36 percent per annum as the prices went on rising day by day. 4% in April, food prices continued to peak even more in months compared to April and showed a significant disparity between the urban and the rural customers.

FactFigure (Source)
Population (2024 est.)238 million (Worldometer)
GDP (PPP, FY23 est.)$1.3 trillion
GDP Growth Rate (FY24 est.)1.8% (World Bank)
Inflation Rate (FY24 est.)25.0% (Asian Development Bank)
Literacy Rate (2023 est.)63.0% (projected based on historical trends)
Major Exports (2024 est.)Textiles, Apparel, Rice, Leather Products (likely similar to 2022)
Major Trading Partners (2024 est.)China, United States, European Union (likely similar to 2022)
CurrencyPakistani Rupee (PKR)

Its forex reserves need to be in better shape, just enough to finance only about a month’s import, and the Pakistan rupee has eroded so much against the US dollar. A political crisis will likely exacerbate these economic challenges and further worsen these financial challenges.

Political Instability and Economic Struggles

Finally, political instability has remained rampant within the country’s political environment, making it experience severe economic problems. Fluctuations in the form of government policies with negative impacts on investment, trade, and fiscal measures have characterized its adjustment. More specifically, the amount of tax revenue in Pakistan is relatively small, which limits the government’s ability to spend on public goods and the development of new infrastructure.

The energy sector plays a vital role in the growth of industries in a country, but this sector is facing more or less problems such as shortages and inefficiency. These internal factors, coupled with external factors such as slow global economic growth and oscillating commodity prices, have primarily contributed to Pakistan’s financial turmoil.

Economic Growth Forecasts

However, there are indicative estimates of particular possibilities of establishing slight economic growth in Pakistan. According to the Asian Development Bank, the member nations’ economies are expected to grow at an average rate of 1. In 2024, the growth rate will be 9%, and the total will be 2. 8% in 2025.

The inflation rate is, however, expected to be high, with rates ranging from 25 being a forecast for the given year. 0% in 2024 and 15% in 2034, with a forecast for Nigeria’s population at 310 million people, while its neighbor, Cameroon’s population, is expected to reach 32 million people in the same year. 0% in 2025. Real per capita GDP is expected to experience a positive growth rate in 2025, while it will experience a slight decline in the year 2024.

Gender Disparity and Financial Inclusion

Gender disparities in financial inclusion remain high in Pakistan, and specific challenges present themselves for women when seeking financial services. There are many barriers to women navigating financial services. However, it is still a rare occurrence for female-headed households in rural areas of Pakistan to have a bank account – more than 60% of women are still excluded from this area. Even efforts towards gender equality, such as the central bank’s Banking on Equality Policy, indicate that there is still a long way to go to achieve account ownership equality.

Manufacturing and Trade

The challenges of Pakistan’s manufacturing sectors include restricted export conditions, energy crises, and unfriendly trade policies. Although the EU has recently added a GSP+ facility to the country, most organizations need to be export-inclined, and the products they produce sell primarily in their local markets.

Infrastructure and Energy

Infrastructure and energy sectors should be a priority destination for investments within Pakistan. The China Package Economic Corridor (CPEC) is a big plan, with $35 billion invested in energy sector projects, which are expected to generate 11,000MW for the energy system. However, critics have questioned the fulfillment of these investments more in that they are not necessarily developing new large transport arteries but improving already existing transport systems.

Social and Political Indicators

As a developing country, Pakistan has learned to disappoint on several social and political fronts, such as education standards, health, sanitation standards, and gender quotas. Analyzing the impact of the country’s forces, one can see that their presence profoundly shapes its politics and economy and, therefore, its developmental course. Measure for decentralizing and depolarizing the polities for the consequential reduction of the military interferences in governance could help advance the economy.

Poverty and Unemployment

The poverty line and unemployment rate of the people of Pakistan are increasing daily. Erradgen estimated the poverty level to be 46% in 2022-23, and the unemployment rate has surged over 9%. 5%. These problems are compounded by what we have considered a regressive tax structure, with most revenues mobilized through indirect taxes.

External Debt and Currency Depreciation

Overall, Pakistan’s external debt has almost doubled during the last few years, whereas the Pakistani rupee has also declined. One of the significant issues that has plagued the country is its reliance on non-resourced financing, including donor government support and crisis credit from global lenders such as the IMF.

Recommendations for Growth

Export-oriented firms were confronted with specific constraints to unleash Pakistan’s full potential for growth. Also, the Pakistani public sector needs to be made more efficient, and the country’s geographic location poses another advantage, as it lies close to one of the most significant economic blocks. Further, tourism needs to be more important as it constitutes a small part of GDP; thus, this could be an area of growth.

Conclusion

There are three major concerns regarding political stability in the context of Pakistan’s economic growth: governance, structure, and political stability. Despite the potential for expansion mainly through, for instance, reliable investments and reforms, the socio-political structure of the country needs to be respected, and the requirements of its populace need to be met to achieve sustainable and Inclusive development.

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TAGGED:Developing economyEducation and skill development in PakistanExport diversification in PakistanGDP growth rate PakistanInvestment in PakistanMajor exports of PakistanPakistan economic growthPakistan Economic Growth: An In-Depth AnalysisPakistan economySouth Asia economicsStrategic location of PakistanTrade partners of Pakistan
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