Islamabad: The Asian Development Bank has raised Pakistan’s economic growth forecast to 3.5 percent for the current fiscal year. The earlier estimate was 3 percent. The bank also expects growth to improve further in the coming years. However, it warned that global uncertainty could slow down progress.
To begin with, the ADB said Pakistan’s economy is showing signs of stability. Growth is projected at 3.5 percent in FY2026 and 4.5 percent in FY2027. This improvement is linked to recovery in manufacturing and better investment conditions. The bank noted that the economy grew by 3.1 percent in FY2025.
At the same time, inflation is expected to rise in the coming years. It may reach 6.4 percent in FY2026 and 6.5 percent in FY2027. This increase is mainly due to higher oil prices and global trade disruptions. In response, the central bank is expected to adjust policy carefully to control inflation.
In addition, key sectors are helping support growth. Manufacturing is recovering, especially in automobiles, cement, and textiles. Construction is also expanding due to government incentives and flood reconstruction work. Services are improving as economic activity becomes more stable. Private investment is also increasing due to better financial conditions and a stable currency.
Meanwhile, Pakistan’s external accounts remain under pressure. Imports are rising, especially oil and machinery, while exports have weakened. Flood-related losses also reduced agricultural exports, especially rice. As a result, the current account is expected to move back into deficit. Remittances remain strong but could face risk if conditions in Gulf countries worsen.
However, the ADB warned that risks remain high. A prolonged conflict in the Middle East could raise energy prices further. This would increase inflation and slow down industrial and agricultural output. It could also reduce remittances and widen the trade gap.
Moreover, the bank stressed the need for continued reforms. It said Pakistan must strengthen energy, tax, and investment systems to maintain stability. Without reforms, economic gains could weaken over time.
Finally, the ADB noted that while the regional outlook remains stable, global uncertainty is rising. Despite these risks, Pakistan’s economy is gradually improving. The key challenge will be to maintain this momentum in a difficult global environment.
