Pakistan can become $750 billion economy by 2025

Pakistan can become $750 billion economy by 2025

ISLAMABAD - Pakistan is at an interesting juncture. The PML-N government will soon finish its current term, and elections would throw open the arena. At the same time, the economy and corporate profits have shown robust growth recently, and a young and aspirational population makes sustaining the momentum an imperative. Parties need to draw up a blueprint for long-term economic growth, and use that as their plank. If Pakistan wants to grow its economy from $300 billion now to $750 billion by 2025, it would have to target a stellar 12% CAGR. That may sound daunting, but many nations like China, Malaysia, etc. achieved decadal double-digit growth in their journey. A high, yet achievable, target pushes the commitment needed from the politicians to realize the economic agenda. But to what extent should Pakistan focus on each growth-driver to realize this target of $750 billion? This is what we explore here.


56% of Pakistan’s GDP is estimated from services; mainly trade and BFSI. This is slightly less than the average 60-70% seen in most large emerging markets. If services have to make up 65% of Pakistan’s GDP by 2025, it would have to grow at a 15% CAGR, higher than the 12% estimated GDP growth.

While trade and financial inclusion would remain priorities, deepening the services-sector through the digital economy would bring efficiencies in public-services delivery, bring more citizens into its organized economy and reduce the leakages of a cash-based economy.

It would also ensure delivery of subsidies to the intended recipients, like India’s Direct Benefit Transfer. It should include improving the quality and reach of skill-centres, to improve employment prospects and productivity.

All these would expand its addressable consumer-base, a necessity in a country where wealth concentration is high.


19% of Pakistan’s GDP is estimated to come from industry, far less than the average 30% seen in large emerging markets.So if its industry has reach even a 20-25% proportion, it would have to grow at a 15% CAGR.

Pakistan’s gross investment at 16% of GDP has far lagged the 35-40% seen in China, Malaysia and Thailand in their initial years of industrialization. If Pakistan intends to push this to at least 30% to drive capacity-addition, its investment has to grow at a sheer 22% CAGR to make up for the lag.

Investment also correlates with productive imports like machinery. In Pakistan, import comprised 8% of GDP, which is roughly half of the share of investment in the economy. This is in line with the experience of recent industrializing nations where the share of imports was seen to be 50-60% of their share of investment. That implies most imports are for productive purposes like investment.

Pakistan should continue this trend. So import should grow at the same CAGR as investment to hold its share at 15% by 2025 (i.e. 50% of the share of investment, estimated at 30% of GDP).

Where should investments go? Corridors and infrastructure apart, the country needs a huge influx in affordable housing for the mass-market segment.

New industry clusters have to focus on the underdeveloped regions to enhance inclusive growth across districts. But this would also mean addressing the Ease of Doing Business parameters, where it lost its rank by 37 places since 2014.


25% of Pakistan’s GDP is estimated to come from agriculture, way higher than its sub-10% share in most large emerging markets. The crux here is to improve farm-productivity, as agriculture employs more than 40% of its workforce.

If it has to halve agriculture’s share to say 12% by 2025, it would grow at a 3-4% CAGR. But this growth has to be backed by productivity improvement. So the incremental investment in the previous section has to correlate with the agro-sector.

It has re-skill unproductive labour for high-growth sectors like construction and retail through skill-training centres. It also means investing in market linkages to ensure the farmer gets the correct price.


Only 18% of Pakistani GDP is estimated to come from exports. Its export has to grow at a rapid 10% CAGR till 2025, if it has to meet the forex demand for imports and make trade imbalance nil.

It has an advantage, because the PKR dropped more than the LKR, and similar to the BDT, last year. This makes it competitive in the export of common products like textile and food.

Drawing up further Free Trade Agreements and export-promotion schemes with its partner countries should open more opportunities. It should also push services-sector export and not rely only on merchandise export, since that would marry its need to push services-sector too.


Pakistan has a high share of private consumption to GDP at 82% vs. 60% in large emerging markets. Myanmar and Bangladesh have a similar per-capita, but they spend less and save more.

Over-dependence on external borrowing is not healthy for the forex position, especially when imports would continue.

It needs to double its savings rate from 14% to 30%+ by energizing its domestic financial sector with more products and regulations. That would incentivize more saving and postponing consumption.

It would also reduce its dependence on external borrowings to fund incremental investment.

All in all, these segmental growth-rate estimates to target a GDP of $750 billion by 2025 may sound over-ambitious. But it is not unachievable, if one looks at similar markets.

Ramping up investment with saving, services-export and farm-productivity can create significant growth traction in the long-term!

By: Souriya Ajit