Pakistan economy to maintain ‘positive momentum’, LSM to recover, says Finance ministry

Pakistan’s economy is projected to maintain its “positive momentum” in the coming months, driven by industrial growth, improved governance, digitalisation, and prudent macroeconomic management, the Ministry of Finance said in its Monthly Economic Update & Outlook December 2025.

In its report, released on Wednesday, the government said “the outlook for Pakistan’s economy remains positive, underpinned by sustained growth in industrial activity with continued momentum in key sectors such as textiles, automobiles, cement, and food processing”.

Earlier on Tuesday, the Pakistan Bureau of Statistics (PBS) reported a 3.71% gross domestic product (GDP) growth in the first quarter of FY2025-26, largely driven by a significant rise in industrial output.

However, government critics, including opposition members and economists, claim that the figures were ‘unrealistic’.

The monthly outlook released today highlighted that Large Scale Manufacturing (LSM) is expected to maintain its trajectory of recovery, supported by ongoing structural reforms aimed at enhancing industrial competitiveness.

“Inflation is projected to remain moderate, in the range of 5.5-6.5% in December, primarily reflecting base effect,” it said.

Pakistan’s headline inflation clocked in at 6.1% on a year-on-year (YoY) basis in November 2025, which was higher than the Ministry of Finance’s then expectations.

Meanwhile, on the external front, Pakistan’s current account is expected to remain within the targeted range. “However, robust remittance inflows and steady performance in IT & services exports are likely to cushion external pressures,” read the monthly outlook.

It shared that fiscal consolidation is expected to continue supporting macroeconomic stability, with government efforts in expenditure management, enhanced tax collection and structural reforms contributing to sustainable growth.