- Agriculture posts modest growth during FY26.
- Food, fuel prices drive inflation higher.
- Middle East conflict clouds economic outlook.
ISLAMABAD: The Asian Development Bank (ADB) said Thursday that Pakistan’s economy grew at 3.7% in fiscal year 2025-26, supported by strong performance in the industrial and services sectors along with modest gains in agriculture.
According to the Asian Development Outlook (ADO) July 2026, the economic growth during FY26, which ended on June 30, 2026, was driven by broad-based expansion across key sectors of the economy.
The ADB, however, revised down its GDP growth forecast for FY2027 to 3.7%, citing higher energy costs and mounting pressure on workers’ remittances that are expected to weigh on economic activity.
The bank also revised Pakistan’s inflation forecast upward to 7.2% for FY26, attributing the increase to rising food and fuel prices.
For FY27, the inflation forecast has been raised further to 8.3%, reflecting the persistent adverse spillover effects of the ongoing Middle East conflict.
According to the ADB, elevated energy prices and continued external uncertainties are expected to keep inflationary pressures high, posing challenges to Pakistan’s economic outlook in the coming fiscal year.
It is pertinent to note that the bank has lowered its growth forecast for developing Asia and the Pacific economies to 4.9% in 2026, down from 5.5% in 2025. This is a reduction of 0.2 percentage points from April projections, according to ADB’s latest economic outlook released by the bank on Thursday.
Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region’s prospects than anticipated, says the ADO report, adding the 2027 growth forecast is maintained at 5.1%, reflecting recovering activity as these pressures ease.
The outlook expects disruptions to global energy markets to unwind only gradually, despite a framework agreement signed in June.
With impacts extending beyond energy to fertilisers, other commodity prices, and supply chains, inflationary pressures are likely to persist.
Regional inflation is now forecast at 4.3% this year compared to 3% in 2025—an upward revision of 0.7 percentage points from April. The inflation forecast for 2027 remains at 3.4%.
