ISLAMABAD: Pakistan’s GDP growth is projected to remain at 3 percent in fiscal year 2025–26 before rising to 3.4 percent in fiscal year 2026–27, driven by a recovery in agricultural production and reconstruction efforts following a series of floods in 2025, the World Bank said.
However, Pakistan current account deficit is expected to widen in fiscal year 2026-27, with a rise in import demand, alongside the strengthening growth, and post-flood normalization of remittance inflows, the Bank stated in its latest report on Global Economic Prospects.
The Bank has also warned that in several oil importers, particularly Pakistan and Tunisia, further increases in US tariffs could lead to notable declines in exports. In addition, economies with a more concentrated export destination structure would be more vulnerable to trade related shocks.
READ MORE: Pakistan’s exports as share of GDP shrinking: World Bank
The report further stated that in Morocco and Pakistan, the implementation of deeper-than-anticipated regulatory reforms to promote private sector activity could boost growth, reduce informality, and create jobs.
In Pakistan, a relaxation of import restrictions and an expansion of bank credit, stemming partly from easing financial conditions, have contributed to the strengthening of activity, particularly in the industrial sector.
Among oil importers, current account balances have improved in Morocco, Pakistan, and Tunisia, partly because of increases in remittances and tourism revenues, it added.
Among oil importers, inflation has declined, particularly on account of softening food prices. This has led to multiple policy rate cuts, including in Pakistan, though monetary policies have still remained restrictive to tame inflation in several economies, the Bank added.
The report noted that the global economy is proving more resilient than anticipated despite persistent trade tensions and policy uncertainty. Global growth is projected to remain broadly steady over the next two years, easing to 2.6% in 2026 before rising to 2.7% in 2027, an upward revision from the June forecast.
The resilience reflects better-than-expected growth—especially in the United States, which accounts for about two-thirds of the upward revision to the forecast in 2026. Even so, if these forecasts hold, the 2020s are on track to be the weakest decade for global growth since the 1960s.
The sluggish pace is widening the gap in living standards across the world, the report finds: at the end of 2025, nearly all advanced economies enjoyed per capita incomes exceeding their 2019 levels, but about one in four developing economies had lower per capita incomes.
In 2025, growth was supported by a surge in trade ahead of policy changes and swift readjustments in global supply chains. These boosts are expected to fade in 2026 as trade and domestic demand soften.
However, the easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown, according to the report. Global inflation is projected to edge down to 2.6% in 2026, reflecting softer labour markets and lower energy prices.
Growth is expected to pick up in 2027 as trade flows adjust and policy uncertainty diminishes.
Copyright Business Recorder, 2026
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