Web Desk: The Asian Development Bank (ADB) has updated Pakistan’s economic outlook, projecting GDP growth at 3.5% for the ongoing fiscal year, reflecting gradual recovery and improved macroeconomic stability. However, the bank has cautioned that global uncertainty, particularly ongoing tensions in the Middle East, could create significant economic challenges.
In its latest Asian Development Outlook (April 2026), ADB indicated that Pakistan’s economy is on a recovery path, with growth expected to further accelerate to 4.5% in FY2027. The upward revision is driven by a rebound in manufacturing activity and renewed investment trends, supported by ongoing structural reforms.
Despite these gains, the report flagged serious risks to the outlook, including inflationary pressures, fiscal constraints, and vulnerabilities in the external sector. The earlier growth estimate for the current fiscal year stood at 3%, showing a notable upward revision.
ADB Country Director Emma Fan stated that Pakistan has made progress in stabilising its economy under challenging global conditions. She emphasised that sustained reform implementation will be key to maintaining growth momentum and strengthening financial buffers against external shocks.
The report forecasts average inflation at 6.4% in FY2026 and 6.5% in FY2027, largely due to rising global oil prices and disruptions in supply chains caused by the Middle East crisis. Given Pakistan’s heavy reliance on energy imports, these factors are likely to intensify economic pressures.
The central bank is expected to adopt a cautious approach toward monetary easing to keep inflation within its target range of 5% to 7%.
ADB also warned that prolonged instability in the Middle East could negatively impact Pakistan’s economy by increasing fuel and fertiliser costs, slowing industrial and agricultural productivity, reducing remittance inflows, and widening the current account deficit.
The report underlined the importance of continuing economic reforms to ensure long-term stability and inclusive growth. A recovery in private sector investment, a stable exchange rate, and government incentives, particularly in construction and post-flood rehabilitation, are expected to support economic expansion in the near term.
