World Bank Forecasts Surprising 2025 Growth for Afghanistan Economy

Afghanistan’s economy is projected to grow by 4.3 percent in 2025, following growth of 2.5 percent in 2024, according to the World Bank’s latest Afghanistan Development Update released in December 2025.

This expansion is largely driven by demand from more than two million recent returnees from Iran and Pakistan, who are stimulating activity in the services and industry sectors, while the agriculture sector remains resilient, achieving a record irrigated wheat harvest despite severe drought conditions.

Mining and construction continue to support economic output, contributing to the overall growth, even as manufacturing and services face challenges due to an unfavorable business environment, persistent export barriers, and a reduction in foreign aid.

Despite overall growth, rapid population expansion estimated at 8.6 percent in 2025 has led to a projected 4 percent decline in GDP per capita, meaning that while the economy is growing, the average Afghan is not seeing proportional gains in income.

Inflation remains among the lowest in the region, averaging 2 percent in 2025, supported by stable food prices and currency appreciation, offering short-term relief for households but reflecting Afghanistan’s heavy dependence on imports and exposure to external shocks.

Fiscal conditions are improving on the revenue side, with domestic tax revenues expected to rise to 17.1 percent of GDP in 2025 due to stronger enforcement and compliance measures. However, declining external grants are shrinking the overall fiscal envelope, leaving the country heavily dependent on donor support and trade-related taxation.