Pakistan GDP grows 2.09% in Q3, supported by agriculture

Pakistan’s economy grew 2.09 per cent in the third quarter of the financial year 2023-2024, supported by higher growth in agriculture, the Pakistan Bureau of Statistics said on Tuesday.

The estimated provisional growth rate of gross domestic product (GDP) for the financial year ending June 2024 is 2.38 per cent, the bureau said in a statement.

That compares with a revised 0.21 per cent contraction in the 2023 year when political unrest, a combination of tax and gas tariff hikes, controlled imports, and a steep fall in the rupee currency rapidly pushed up inflation.

Last week in its half yearly report, Pakistan’s central bank projected real GDP growth of 2-3 per cent for the fiscal year 2024.

There was no comparable year-ago third-quarter GDP data as Pakistan only began releasing quarterly growth numbers from November. That was done in compliance with the structural benchmarks of the current $3 billion bailout programme agreed with the International Monetary Fund and completed last month.

The bureau revised the first- and second-quarter GDP estimates for financial year 2023-2024 to 2.71 per cent and 1.79 per cent respectively, compared to earlier estimates of 2.5 per cent and 1 per cent.

The provisional 2024 financial year growth in agriculture was estimated at 6.25 per cent, and 1.21 per cent for both industry as well as services, it added.

“The healthy growth of agriculture is mainly due to double-digit growth in important crops,” the bureau said, adding that bumper wheat, cotton, and rice crops contributed to the positive result.

A current account surplus of $491 million has been recorded in April 2024, said Pakistan’s central bank, adding that the July-April current account deficit improved significantly to $0.2 billion, compared with $3.9 billion in the year-earlier period.

Meanwhile Pakistan’s main share index continued its rally to breach the 75,000 mark for the first time on May 15 (Wednesday) on the back of heavy foreign buying while expectations of monetary easing amid falling inflation also underpinned sentiment.

Pakistan’s benchmark share index closed at 74,684 points, up 0.2 per cent on the day after rising to 75,115 earlier in the session. The benchmark index has surged 79 per cent over the past year, and is up 15.5 per cent year-to-date after an IMF rescue last summer helped the government avert a debt default.

Mohammed Sohail, CEO of Topline Securities, said Wednesday’s gains were fuelled by foreign fund buying.

On Tuesday, the MSCI index added a Pakistani bank, National Bank of Pakistan, to the MSCI frontier market index. Its shares rose 1.1 per cent on the day, outperforming the benchmark index.

“We estimate Pakistan’s weight will also increase, thereby having the potential to attract more passive foreign funds,” Sohail said.

Net foreign purchases of shares stood at $65 million in little over five months of 2024, compared with $74 million in calendar year 2023. Pakistan shares saw cumulative net outflows of $978 million between 2020 and 2022, according to data compiled by Arif Habib Limited.

“Pakistan equities are up 80 per cent during fiscal year to date, with the currency appreciating marginally during the same period, the index is up 85 per cent in dollar terms, making it an outstanding investment for a foreign fund manager,” said Adnan Sheikh, research analyst at Pak Kuwait Investment Company.

The market is picking up steam due to an anticipated decline in inflation to 13.5% during May and expectations of a monetary easing cycle starting in June, said Shahid Habib, CEO of Arif Habib Limited. Consumer price inflation slowed to 17.3 per cent in April from a year earlier, the lowest reading in nearly two years.

Investors were also optimistic about discussions on a new IMF financing programme and the economic roadmap ahead, Habib said.

Pakistan last month completed a short-term, $3 billion IMF programme, but the government of Prime Minister Shehbaz Sharif has stressed the need for a fresh, longer-term programme.

An IMF mission is in Pakistan to discuss the financial year 2025 budget, policies, and reforms under a potential new programme.

Pakistan’s consumer price inflation slowed to 17.3 per cent in April from a year earlier, the lowest reading in nearly two years and below the finance ministry’s projections.

The country has struggled with inflation above 20 per cent since May 2022. Inflation jumped as high as 38 per cent in May 2023, as Pakistan navigated reforms as part of an IMF bailout programme.

“Corporate profits are strong, the market’s (price-earning) multiple is still only around 4, which is well below the historical average of 6, including the distressed times in this average,” she added.