Afghanistan's economy is showing signs of a gradual recovery, according to the World Bank's latest Afghanistan Development Update. The country's GDP grew by an estimated 2.5 percent in 2024, marking the second consecutive year of economic expansion. This growth is largely driven by agriculture, mining, construction, and commerce. However, the manufacturing and services sectors continue to be hindered by unfavorable business conditions, export barriers, and reduced foreign aid.
The report highlights several challenges, including a widening trade deficit due to rising imports, which exacerbates external vulnerabilities. Population growth has stagnated per capita income, while poverty and food insecurity are persistent issues worsened by high unemployment and restrictions on women's economic participation.
Deflation pressures are easing, but there remain serious risks to economic stability, wages, and investment. "While Afghanistan’s economy is showing signs of recovery, it continues to be held back by significant fiscal challenges, with domestic revenue mobilization proving insufficient to offset a decline in aid," said Faris Hadad-Zervos, World Bank Country Director for Afghanistan.
The financial sector is particularly vulnerable, characterized by regulatory uncertainty, increasing non-performing loans, and constrained lending activity. These issues underscore the need for financial reforms to aid economic stability.
A special focus of the report is the employment challenges facing youth and women. Afghanistan's young population is seen as a source of resilience and potential. Yet youth unemployment remains high, with nearly one in four young Afghans without work. Well-designed employment programs are urgently needed to develop skills and increase economic participation, especially for women. Hadad-Zervos emphasized, "Policies that limit women's participation in the workforce and girls' access to post-primary education will affect the country's human capital development, long-term growth, and foreign aid prospects."
The Afghanistan Development Update is produced under the World Bank's Afghanistan Futures program, which aims to support evidence-based policymaking and provide insight into the Afghan economy. This update is released alongside the South Asia Development Update, which forecasts regional growth to slow and emphasizes the need for improved domestic resource mobilization.