Pakistan’s economic growth accelerated in FY16 and started to catch up with its regional neighbors with gross domestic product (GDP) in FY16 expanding at 4.7 percent—the highest rate in eight years and a significant increase from the previous year’s 4.0 percent. 1 Amidst an environment of soft global demand, Pakistan’s growth in FY16 was driven by strong domestic demand. Consumption accounted for an overwhelming 92 percent of GDP in FY16, and contributed 7 percentage points towards GDP growth (moderated by a negative contribution of 2.2 percent from net exports), supported by sustained growth in remittances. In the medium-term, Pakistan’s growth is expected to continue to accelerate, reaching 5 percent in FY17 and 5.4 percent in FY18 driven by investment and productivity gains in services and manufacturing. These sectors should benefit from the structural reform agenda leading to decreased electricity load-shedding and improvements in the business climate. In the near term, investments under the China Pakistan Economic Corridor (CPEC) and low international oil prices would also support growth. Increasing reserves continue to contribute to stability in foreign exchange markets, which contributed to low inflation of 4 percent in FY16. The Pakistan Rupee (PKR) remained largely stable with a small depreciation of about 3 percent against the US Dollar during FY2014/15.