Inflation to lower in March as inflationary pressures ease: report

ISLAMABAD: Inflation in Pakistan is expected to inch up in April 2025, even as the economy stabilises amid low growth. The Ministry of Finance, in its latest monthly report, did not share GDP growth projections but forecast that consumer price index (CPI)-based inflation would rise slightly in the coming month.

Inflation is anticipated to remain within the range of 1-1.5 per cent for March 2025 and increase to 2-3 per cent in April 2025. CPI inflation stood at 1.5 per cent year-on-year in February 2025, down from 2.4 per cent the previous month and significantly lower than 23.1 per cent in February 2024. On a month-on-month basis, CPI declined by 0.8 per cent, compared to a 0.2 per cent increase in January.

The Ministry of Finance attributed the easing of inflationary pressures to declining food and energy prices. However, inflation remains driven by rising costs in key sectors, including health (14.3 per cent), clothing and footwear (13.8 per cent) and education (10.9 per cent). Meanwhile, perishable food items saw a notable decline of 20.3 percent, along with reductions in non-perishable food items (1.5 per cent), transport (1.1 per cent), and housing, water, electricity, gas, and fuels (0.6 per cent).

On the external front, exports, imports and workers’ remittances are expected to maintain an upward trend. Seasonal factors related to Ramazan and Eid are likely to boost remittance inflows in the coming months. Economic expansion is expected to support growth in exports and imports, helping to keep the current account within manageable limits.

Despite challenges, the economy shows signs of resilience, particularly in fiscal and external stability. Fiscal consolidation measures have led to a primary surplus and a narrowed fiscal deficit. The fiscal deficit stood at 1.7 per cent of GDP in July-January FY2025, down from 2.6 per cent in the same period last year. The primary surplus increased to Rs3,518.7 billion (2.8 per cent of GDP) from Rs1,938.8 billion (1.8 per cent of GDP) a year earlier. Net federal revenues surged by 45.3 per cent to Rs6,362.5 billion in the first seven months of FY2025.

The industrial sector remains volatile, with Large-Scale Manufacturing (LSM) showing mixed trends. LSM grew by 2.1 per cent month-on-month in January 2025, reflecting a mild recovery from December 2024. However, on a year-on-year basis, LSM contracted by 1.2 per cent, reversing the 1.1 per cent growth seen last year. During July-January FY2025, LSM declined by 1.8 per cent, compared to a 0.6 per cent contraction in the same period last year. Sectoral trends within LSM showed a mixed performance, with 11 out of 22 sectors posting positive growth. Notable increases were recorded in textiles (2.1 per cent), wearing apparel (10.4 per cent), coke and petroleum products (2.5 per cent), pharmaceuticals (2.0 per cent), and automobiles (45.7 per cent). The automobile sector performed particularly well, with car production increasing by 41.9 per cent, trucks and buses by 105 per cent, and jeeps and pickups by 78.2 per cent. However, tractor production declined by 30 per cent.

The agricultural sector is also expected to contribute to economic stability. Wheat production for the Rabi 2024-25 season is targeted at 27.9 million tonnes, supported by government initiatives, including input subsidies, high-yielding seed distribution and interest-free loans under the Kissan Card scheme. Agricultural credit disbursement grew by 16 per cent in July-January FY2025, reaching Rs1,483.6 billion, while the import of agricultural machinery increased by 45.7 per cent to $77.2 million during July-February FY2025.