MANILA – The economic growth of Pakistan is projected to remain at 3.7 percent in FY2027 as lingering effects from the Middle East conflict dampen macroeconomic momentum, said the Asian Development Bank (ADB) in its outlook for September 2026.
It has also forecast that inflation is expected to remain high at 8.03 percent compared to the projection made by Pakistan at 7%.
“Average inflation is projected to rise to 8.3pc in FY27, above the central bank’s medium-term target range of 5pc–7pc, as elevated energy, logistics, and agricultural input costs continue to affect domestic prices”, the ADB report said.
The bank has warned that Pakistan’s economic recovery remains vulnerable to several domestic and international pressures. A further escalation of tensions in the Middle East could raise fuel and energy costs, increase inflationary pressure and affect employment opportunities in Gulf countries. Such developments could also have an impact on the flow of remittances sent home by Pakistani workers.
The bank noted that renewed fiscal tightening by the government could create additional pressure on economic activity. If public spending is reduced more sharply than expected, household consumption and overall domestic demand could weaken.
Other risks include tighter access to international financing, lower-than-expected tax revenues, adverse weather conditions affecting farm output, and delays in reforms targeting the energy sector and state-owned companies.
Despite these challenges, Pakistan’s economy recorded stronger growth in FY26, reaching 3.7% compared with 3.2% in the previous fiscal year. Services remained relatively strong, while manufacturing, agriculture and private investment also improved. However, growth momentum weakened toward the end of the year.
The ADB said continued structural reforms, stronger foreign-exchange reserves, improved access to international capital and recent credit-rating upgrades could encourage investment. Nevertheless, high energy prices and global uncertainty may continue to restrain growth.
“Pakistan’s economy has made progress in strengthening macroeconomic stability over the past two years, with stronger growth, improved external buffers, restored market confidence, and sovereign credit rating upgrades reflecting the benefits of sustained reforms”, said ADB Country Director for Pakistan Emma Fan.
“Maintaining reform momentum will be critical to unlock higher private investment, strengthen resilience to external shocks, and achieve stronger and more inclusive growth.“
