Pakistan’s economic growth is expected to reach 1.3 percent in FY2021 and strengthen to an average of 2.7 percent for FY2022-23, according to the Pakistan Development Update released today. The baseline economic growth forecast, however, is highly uncertain, especially given the third and more-contagious wave of the pandemic currently circulating in the country.

Private consumption is estimated to have picked up over July to December 2020, in part due to the record increase in remittances inflows, social assistance support from the Ehsaas program, the government’s construction package, and a return to pre-COVID mobility levels from September 2020. Investment is also estimated to be recovering, as machinery imports and cement sales both recorded double-digit growth rates during this period.

“It is crucial to sustain the positive reform momentum to continue to boost the competitiveness of Pakistan’s economy and lay a strong foundation for a more robust, inclusive and sustainable recovery,” said Najy Benhassine, World Bank Country Director for Pakistan. “Increasing competitiveness and stimulating private investment and exports will require continued macroeconomic stability, maintenance of a market-determined exchange rate, and improving the business environment to enable all firms, particularly SMEs, to access markets and compete openly in a leveled playing field. The potential for a strong recovery and a growth acceleration is there. Reforms to make it happen need to be further sustained.”

Given the scope and magnitude of the COVID-19 crisis, understanding how the pandemic affected Pakistan’s private sector will be key to informing the design of new policy measures or refining existing ones to prevent widespread long-term firm closures and job losses.