Navigating Challenges: Afghanistan’s Uncertain Future Economy Amidst Recession and Deflation

The future of Afghanistan’s economy remains uncertain, with a bleak outlook that could last until at least 2025, according to the World Bank’s latest Afghanistan Development Update. The report, titled Navigating Challenges: Confronting Economic Recession and Deflation, highlights a 26 percent contraction in real GDP growth and a decline in external financing avenues for off-budget expenditures. This presents a significant challenge for the country’s economic progress.

Structural deficiencies in the private sector and decreasing international support for essential services are expected to hinder any significant economic advancements. These factors are likely to exacerbate poverty and unemployment, with half of the population already living in poverty and 15 million people facing food insecurity.

To address these challenges, it is crucial to shift from consumption-driven growth and international aid reliance to a more resilient, private sector-led economy. This shift should focus on addressing harmful gender policies, investing in health and education, and capitalizing on Afghanistan’s strengths in agriculture and extractive sectors. Agriculture has the potential to drive growth, reduce poverty, create jobs, and improve income distribution. To unlock this potential, strategic investments are required in irrigation infrastructure, land tenure security, and market access to enhance agricultural productivity and resilience.

The Afghanistan Development Update is part of the World Bank’s Afghanistan Futures program, which produces research, monitoring, and analytical reports on the country’s economy and society. Through this program, the World Bank aims to support evidence-based policymaking and provide insights to the international community on economic developments in Afghanistan. For more information on how you can get involved or learn more about this topic please contact Diana Chung at dchung1@worldbank.org in Washington.