Pakistan’s economic growth is expected to gradually improve in the long term, but challenges like corruption and diminished geopolitical importance could hinder its full potential, according to a report by Bloomberg Economics.
South Asia Economist Ankur Shukla noted in the report that the country’s potential growth rate—the maximum rate at which an economy can grow without triggering additional inflation—could reach 4.0% by the fiscal year 2040. This marks an increase from the 3.2% potential growth seen in the last fiscal year but remains lower than the growth rates achieved in the mid-2000s.
As Pakistan seeks final approval from the International Monetary Fund (IMF) for a $7 billion loan to stabilize its economy and manage its increasing debts, Shukla highlighted that this financial support should prevent a default in the near term and likely facilitate growth-oriented reforms, such as easing investment regulations.
However, Shukla warned that Pakistan’s failure to address deeper structural problems like corruption, weak political institutions, and its likely decreased geopolitical significance following the US withdrawal from Afghanistan could make it difficult to attract more foreign investment.
