March inflation likely to land between 1-1.5pc, Finance Division report says

Pakistan inflation for February 2025 has clocked in at 1.5 per cent, according to the ‘March 2025 Economic Monthly Update & Outlook’ report released by the Finance Division on Tuesday. The Ministry of Finance expects it to remain stable in the month of March as well.

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Here are some of the key highlights on country’s economic performance as shown in the report:

Inflationary pressures have eased, primarily due to the reduction in food and energy prices, leading to price stability. In February 2025, the Consumer Price Index (CPI) inflation slowed to 1.5 per cent year-on-year (YoY), down from 23.1 per cent in February 2024.

The State Bank of Pakistan (SBP) has kept the policy rate at 12 per cent in March 2025, after a 1000 basis point cut since June 2024.

Fiscal consolidation efforts also yielded positive results, with fiscal deficit narrowing to 1.7 per cent of the GDP in the first half of the current fiscal year (Jul-Jan FY2025), as compared to 2.6 per cent from the same time period last year.

The current account also remained in surplus of $691 million in eight months of FY2025 (July 2024 to February 2025), compared to a deficit of $1.73 billion in the same period last year.

The report showed that exports increased by 7.2 per cent during the same time period. However, despite increase in exports, the trade deficit on goods increased due to an even higher increase in imports, particularly in machinery and petroleum products. Services trade deficit also widened.

Remittances grew by 32.5 per cent, reaching $24 billion during Jul-Feb FY2025, with significant contributions from Saudi Arabia and UAE.

Breakdown of the economic sectors showed that the agricultural sector showed growth. Disbursements of agricultural credit grew by 16 per cent to Rs. 1,483.6 billion during Jul-Jan FY2025. The government has set a target of 27.9 million tonnes of wheat production for the Rabi season 2024-25. This would be supported by initiatives such as input subsidies, high-yielding seeds, and interest-free loans.

In large-scale manufacturing sector mixed results were observed, with the industry growing by 2.1 per cent month-on-month (MoM) in January 2025, but contracting by 1.2 per cent year over year. Key sectors like textiles, automobiles, and pharmaceuticals posted positive growth.

GOING FORWARD

The report says that global growth trend is expected to decelerate, with inflation showing signs of downward movement in advanced economies. However, trade policy uncertainties, such as tariffs, pose potential risks to economic stability.

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Specifically for Pakistan, the inflation rate is expected to remain low in March 2025 (around 1-1.5 per cent), but may rise to 2-3 per cent in April 2025 due to seasonal factors.

Exports, imports, and remittances are all expected to continue growing, which will help in maintaining the current account within manageable limits.