Editorial
Pakistan’s recent claims of economic stabilisation, marked by a notable decline in inflation, appear to mask a deeper crisis. While the Consumer Price Index (CPI) increased by just 4.1% in December 2024, a significant drop from the 29.3% in December 2023, the economic growth remains dismal. Over the past five years, Pakistan’s GDP growth averaged a mere 2.6%, only slightly above the population growth rate, leaving the majority of the population without an increase in real income.
The lack of substantial growth can be attributed to both domestic and external factors. Policy measures like high interest rates, import restrictions, reduced federal spending, and increased indirect taxes have stifled growth. Furthermore, the COVID-19 pandemic and the 2022 floods, which caused an estimated $30 billion in damages, also played a major role in exacerbating the economic decline, resulting in negative GDP growth in 2019-2020 and 2022-2023.
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However, the impact on employment and wages paints an even bleaker picture. The labor market has suffered due to low GDP growth. With unemployment rates rising, the ‘open’ unemployment rate is now estimated to be 9.4%, with underemployment pushing this figure to over 10%. Female workers and youth entering the labor market face even higher unemployment rates, with an estimated 20 million youth currently idle.
Additionally, real wages, particularly in the construction sector, have fallen by nearly 20% over the last three years, as nominal wages fail to keep up with inflation. The worsening labor market conditions, combined with stagnating wages, underline the urgent need for policies that promote growth, reduce interest rates, and alleviate the burden on the industrial sector to avoid further economic distress.