Pakistan’s growth outlook has improved: Asian Development Bank

ISLAMABAD: The growth outlook for Pakistan has improved for both 2025 and 2026, as the prices of key food items have begun to stabilize following a sharp increase in the months immediately after the floods, said the Asian Development Bank (ADB).

In its report ‘Asian Development Outlook growth steadies but uncertainty lingers’, the Bank stated that in the case of South Asia, 2026 growth forecasts have been revised upward for Sri Lanka and Pakistan, respectively, due to increased public investment and a less-severe-than-anticipated impact of flooding.

Pakistan’s fiscal year 2025 growth outlook is upgraded following a stronger-than-expected quarter (Q4). Growth forecasts for the remaining South Asian economies are retained, although Nepal faces lingering uncertainty in the aftermath of civil unrest in September and the ongoing political transition, it added.

The Bank further stated that the government of Pakistan updated its estimate of GDP growth for fiscal year 2025 to 3 percent from a previously reported 2.7 percent. Despite disruptions that resulted from floods in June 2025, the economy grew 5.7 percent in Q4 fiscal year 2025, and the country’s large-scale manufacturing expanded robustly in recent months in fiscal year 2026.

ADB warns of economic water scarcity in Pakistan

The Bank further stated that Pakistan’s inflation for the first 4 months of fiscal year 2026 was 4.7 percent, down from 8.7 percent in the same period a year ago. After a sharp increase in the months immediately after the floods, prices of key food items have begun to stabilize.

The Bank has raised its growth forecasts for economies in developing Asia and the Pacific for this year and next, amid stronger-than-expected exports and reduced trade uncertainty following the conclusion of several trade agreements with the United States.

Resilient exports — particularly of semiconductors and other technology products — moderating inflation, and stable financial conditions have strengthened the region’s growth outlook. Lifted by stronger-than-expected growth in India, the region’s economy is now projected to expand by 5.1percent this year, compared with a 4.8percent forecast in September, according to ADO. The outlook for next year has also been upgraded by 0.1 percentage points to 4.6percent.

“Asia and the Pacific’s solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty over the past year,” said ADB Chief Economist Albert Park. “Trade agreements have partly eased that uncertainty, but external and other challenges could still weigh on the outlook. Governments in the region should continue to foster open trade and investment to sustain resilience and growth.”

Risks to the regional outlook include renewed trade tensions and financial market volatility, as well as geopolitical pressures and a worse-than-expected deterioration in the People’s Republic of China’s (PRC) property market.

Inflation in developing Asia and the Pacific is expected to ease further to 1.6percent this year, compared with a 1.7percent projection in September. This mainly reflects lower-than-anticipated food inflation in India. The region’s inflation forecast for next year remains at 2.1percent.

Copyright Business Recorder, 2025