Pakistan's Economy Grapples with Unprecedented Crisis

Strategic Insights -

Pakistan's economy is facing an unprecedented crisis, marked by rising poverty and unemployment. According to Shahid Rasheed Butt, a notable business leader, the country's economy is struggling with low growth and high inflation, resulting in alarming poverty levels. Official data reveals that the unemployment rate has reached a historic high of over 22 percent, significantly impacting real wages for millions of workers.

Key Takeaways:

  • The unemployment rate has reached a historic high of over 22 percent, severely impacting real wages for millions of workers.
  • The average GDP growth over the past three fiscal years has been a mere 1.7 percent, insufficient to provide jobs for the nation's labor force of nearly 85 million.
  • Four critical labor-intensive sectors (agriculture, manufacturing, construction, and wholesale and retail trade) employ over 75 percent of the workforce, with three of these sectors experiencing negative growth.
  • The population and housing census reported 66.2 million employed individuals compared to nearly 18.8 million unemployed, with unemployment having risen by over 12 percentage points since 2017.
  • The poverty rate has surged to 44 percent, with many unemployed individuals likely falling below the poverty line due to the absence of earned income.
  • Inflation has outpaced wage growth, with the average inflation rate exceeding 19 percent over the last three years, and 2022-23 witnessing a record 29.2 percent inflation.
  • Real wages have dropped by over 20 percent in sectors like construction, with service workers in low-income sectors facing similar declines.
  • The government aims for a GDP growth target of 4.2 percent for 2025-26, but analysts caution that sustained growth of at least 5 percent is necessary to create sufficient jobs and reduce poverty.

Statistics:

  • Unemployment rate: over 22 percent (historically high)
  • Unemployment rate increase since 2017: over 12 percentage points
  • Poverty rate: 44 percent
  • Average GDP growth over the past three fiscal years: 1.7 percent
  • Average inflation rate over the last three years: 19 percent
  • 2022-23 inflation rate: 29.2 percent
  • Real wages drop in construction: over 20 percent
  • Unemployed individuals: nearly 18.8 million
  • Employed individuals: 66.2 million
  • Labor force: nearly 85 million people

Sources:

  • Statement by Shahid Rasheed Butt, notable business leader and former president of the Islamabad Chamber of Commerce and Industry
  • Official data
  • Population and Housing Census 2023
  • Islamabad Chamber of Commerce and Industry (no date)