- Dressing inflation, favorable monetary policy to increase LSM growth.
- The economy continued to show the progress of July-Janvier Fy5.
- Positive perspectives of economic growth expected in the coming months.
Inflation based on the consumer price index of Pakistan (ICC) should check in March after having stayed flat in February, while maintaining its downward trajectory throughout the year, the finance division projected Thursday.
“Inflation should remain in the range of 2 to 3% for February, however, there are prospects for a slight increase to 3 to 4% by March,” said “economic update and monthly prospects”, for February 2025 published by the wing of the economic advisor of the financial division.
The holy month of Ramadan fasting, starting in Pakistan on March 2, often sees a seasonal increase in food inflation as households increase their expenses. The food, drinks and prices of other edible products generally increase to Ramadan, putting pressure on household budgets and leaving a lot of desperate. Analysts suggest that this factor will probably stimulate the projected increase in inflation.
The prospects note that an important reference in inflationary pressures in addition to a monetary support policy should strengthen the morale of companies and underlie the recovery of large-scale manufacturing (LSM). The report indicates, however, that the export -oriented industries have increased despite the slowness of the LSM sector.
“The sharp drop in inflation has favored a stable financial environment, allowing the central bank to regularly reduce the policy rate,” said the report. “The economy continued to demonstrate positive developments during July-July 25, as evidenced by the improvements in key economic indicators.”
Last month, the State Bank of Pakistan reduced its reference interest rate by 100 base points to 12% while inflation continues to weaken and growth seems to be rebounding after 1,000 basis of rate reduction points in the last half.
The rates were reduced by 22% higher last June – one of the most aggressive movements among the central banks of emerging markets and exceeding its 625 BPS of rate drop in 2020 during the Pandemic COVID -19.
IPC inflation was 2.4% in annual shift in January 2025, compared to 4.1% in December 2024, data from Pakistan Bureau of Statistics (PBS) showed it.
“The decision (MPC) was based on the results of inflation in accordance with expectations, supported by moderate interior demand conditions and a dynamic of support for the offer,” said the report.
The inflation of stubbornly high titles was a persistent economic challenge for the country, reaching a record of 38% in May 2023, but has since followed a downward trend.
The ministry from economic perspectives maintains that higher growth in funding and IED has further strengthened the feelings of economic agents, adding, these factors collectively indicate positive perspectives of economic growth in the coming months.
“On the external front, exports, imports and shipments of workers’ funds should maintain their upward trend. In the coming months, funding of funds should increase more due to seasonal factors such as Ramadan, Eid-Ul-Fitr and Eid-UL-Adha,” said the report.
The prospects have also projected exports and imports to improve due to the expansion of economic activity, while all these factors should help maintain the deficit in the current account within manageable limits.