The Future of Afghanistan’s Economy: A Daunting Outlook Amid Ongoing Challenges

Afghanistan’s economic future remains uncertain, with the threat of stagnation looming large until at least 2025, according to a new report from the World Bank. The report, 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 paints a stark picture of Afghanistan’s economic prospects, with structural deficiencies in the private sector and waning international support for essential services expected to impede any significant economic progress.

The economic stagnation is likely to deepen poverty and unemployment, affecting half of the population already trapped in poverty and 15 million people facing food insecurity. To address these challenges, Melinda Good, World Bank Country Director for Afghanistan, emphasized the importance of shifting from reliance on consumption-driven growth and international aid to a more resilient, private sector-led economy. This would capitalize on the country’s strengths and pave the way for sustainable future development. Good highlighted the need to address harmful gender policies, invest in health and education, and focus on the comparative advantages in the agricultural and extractive sectors.

Agriculture is identified as a potential key driver of growth and poverty reduction in Afghanistan. Strategic investments in irrigation infrastructure, land tenure security, and market access are needed to boost agricultural productivity and resilience, create jobs, and improve income distribution. The Afghanistan Development Update is part of the World Bank’s Afghanistan Futures program, which aims to support evidence-based policymaking and inform the international community about economic developments in Afghanistan.

The World Bank’s Afghanistan Futures program includes research