ISLAMABAD: The World Bank has revised the GDP growth rate projection downward for Pakistan by 0.5 per cent to 2.6 per cent for the current fiscal year 2025-26 against the earlier projection of 3.1 percent (June 2025), while saying that ongoing catastrophic floods have damped the forecast, and also warned of a rise in inflation due to disruption in food supply chain.
In its latest report, “Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) economic update, jobs and women untapped talent, unrealized growth,” the Bank stated that early estimates suggest a drop of at least 10 percent in agricultural output in Punjab, affecting major crops such as rice, sugarcane, cotton, wheat, and maize.
For fiscal year 2026-27, growth is expected to accelerate to 3.4 percent, supported by higher agricultural output, lower inflation and interest rates, recovering consumer and business confidence, and a rebound in private consumption and investment.
World Bank projects 3.1pc GDP growth rate for Pakistan
In Pakistan, real GDP at factor cost is expected to have grown by 2.7 percent year-on-year in fiscal year 2024-25, slightly above FY 2023/24’s 2.5 percent expansion.
Looking ahead, Pakistan, which has historically maintained high tariffs with a complex structure, stands to benefit in terms of exports and growth from a recently approved five-year reform plan (2025–30) to reduce its tariffs by half. In economies such as Egypt, Jordan, and Pakistan, removing the barriers that prevent women from joining the labor market could lift GDP per capita by 20 to 30 percent—the largest potential gains globally.
The economic outlook for MENAAP has shown signs of improvement in recent months, with regional GDP growth expected to average 2.8 percent in 2025 and 3.3 percent in 2026, the report noted.
Pakistan’s inflation rate dropped to single digits in fiscal year 2024-25, as price increases for food and energy eased.
However, disruption to food supply chains, due to ongoing catastrophic floods, is expected to push inflation up through 2027.
The Bank has stated that countries, such as Tunisia and Pakistan, could see declines in their global exports in the order of 0.5 percent and 1.5 percent, respectively.
In line with global trends, poverty at the lower-middle-income line in Pakistan dropped by 9.4 pps between 2011 and 2018, the year of the most recent available estimate. However, a combination of economic shocks and natural disasters since 2020 is projected to have stalled this trend of poverty reduction. Furthermore, due to its relatively high poverty rate and large population, the country accounts for a large share of MENAAP’s poor.
Pakistan has one of the highest fertility rates in the region, at 3.5 percent. However, its demographic transition is following a similar trajectory as its peers, only delayed, with the fertility rate projected to fall below replacement level within one generation.
Copyright Business Recorder, 2025
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