Pakistan’s GDP is expected to grow modestly by 2.6% in fiscal year 2025-26, as severe floods continue to impact agriculture and inflationary pressures rise, according to the latest World Bank report for the Middle East, North Africa, Afghanistan & Pakistan (MENAAP).
The report stated that Pakistan’s real GDP grew 2.7% year-on-year in FY2024-25, slightly above FY2023-24’s 2.5% growth. For FY2025-26, the forecast remains around 2.6%, mainly due to disruptions in key agricultural regions caused by catastrophic flooding.
Early estimates suggest a 10% decline in agricultural output in Punjab, affecting major crops such as rice, sugarcane, cotton, wheat, and maize. These disruptions are expected to impact food supply chains, potentially pushing inflation higher through 2027, even though it fell to single digits in FY2024-25.
Looking forward, the World Bank projects Pakistan’s GDP growth could accelerate to 3.4% in FY2026-27, supported by higher agricultural output, lower inflation, improved consumer confidence, and a rebound in private investment and consumption.
The report also highlighted Pakistan’s recent five-year tariff reform plan (2025–2030), aimed at reducing high tariffs by half. This initiative is expected to support exports and economic growth over the medium term.
Despite past gains, poverty reduction has stalled due to economic shocks and natural disasters since 2020. While poverty at the lower-middle-income line fell 9.4 percentage points between 2011 and 2018, Pakistan continues to account for a significant share of poor populations in the MENAAP region.
The World Bank also noted that Pakistan has a high fertility rate compared to regional peers. However, its demographic transition is following a similar trajectory, with fertility expected to fall below replacement level within a generation. Increasing female participation in the labor market could potentially raise Pakistan’s GDP per capita by 20–30%, the largest gain projected globally.
Pakistan’s GDP outlook reflects both current challenges from floods and inflation and long-term opportunities through reforms and demographic improvements.
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