KEY HIGHLIGHTS
- Economic Growth: Afghanistan’s economic progress in 2024 remained uneven and vulnerable to external and internal challenges. The country’s reliance on consumption-driven recovery, coupled with limited investment and deflationary pressures, underscores the need for structural reforms. Strengthening market infrastructure, improving domestic production, private sector development, particularly in agriculture sector, and fostering greater economic resilience are critical as Afghanistan approaches 2025. Despite reduced market prices, millions remain vulnerable due to high poverty levels, limited access to resources, restricted purchasing power and unemployment. However, without robust policy changes and international engagement, the country faces a prolonged economic stagnation, with continued poverty and limited growth opportunities anticipated through 2025. Especially during the winter season which the challenges of households, including limited access to food, fuel, and essential services
- Inflation Rate: Afghanistan remained in a deflationary phase throughout 2024, with inflation reaching - 5.1% by September 2024. Food inflation hit its lowest at -15.1% in January 2024 before rising slightly to -8.3% in September 2024. Despite deflation eased the prices of basic food and non-food commodities, it poses risks to economic stability and growth, including reduced business profitability and potential job losses.
- Exchange Rate Movements: The Afghani traded at an average of AFN 69.5/USD in December 2024, reflecting a 2.2% depreciation from November. The exchange rate fluctuated between AFN 65 and AFN 74 throughout the year 2024, it returned to the same rate as observed during the same period last year. Despite economic sanctions and limited foreign investments, the Afghani remains one of Asia's best-performing currencies, supported by multiple factors including International aid (USD shipments to Afghanistan), flow of remittances, strict monetary controls by the DFA and USD auctions by the Central Bank.
- Global Market Influence: Global cereal and cooking oil prices significantly influence domestic prices due to the country's high import dependency. The national average price of wheat flour decreased slightly by 0.2% compared to the previous month and is 6% lower than the same period last year. While cooking oil prices steadily declined since mid-2022-2023, the upward movement started in May 2024 in vegetable oil prices has pushed the national average prices up, making it 22% higher than last year. The FAO Cereal Price Index stabilized at 114 points in December 2024, reflecting a 9.3% decrease from the previous year but remaining 14 points above its May 2020 baseline. Wheat export prices held steady, as lower demand and harvests from Argentina and Australia balanced concerns over poor winter crop conditions in the Russian Federation. Similarly, the FAO Vegetable Oil Price Index declined by 0.5% month-on-month in December but was 33.5% higher than a year earlier. This was driven by lower soy, rapeseed, and sunflower oil prices, which were offset by a 2.0% increase in palm oil prices due to tight supplies in Southeast Asia.