The Asian Development Bank (ADB) has maintained Pakistan’s economic growth forecast at 3.7% for FY2027, below the government’s 4% budget target, while projecting inflation at 8.3%, above the official estimate of 7%.
In its September edition of the Asian Development Outlook, the Manila-based lender retained its July growth forecast of 3.7%, after previously expecting 4.5% growth in its April 2026 outlook. The ADB said higher energy, logistics and agricultural input costs are likely to keep inflation above the central bank’s medium-term target range of 5% to 7%.
The bank warned that Pakistan’s economic outlook faces significant downside risks, particularly from the ongoing conflict in the Middle East. A further escalation could raise energy import costs, increase inflationary pressures and disrupt labour markets in Gulf countries, potentially affecting workers’ remittances.
The ADB also cautioned that renewed austerity measures could weaken domestic demand and economic activity if government spending cuts are deeper than expected. Other risks include tighter global financing conditions, weaker-than-expected tax revenues, weather-related agricultural shocks and delays in energy-sector and state-owned enterprise reforms.
Despite these challenges, the ADB said Pakistan’s economy strengthened in FY2026, with growth accelerating to 3.7% from 3.2% in FY2025. The improvement was supported by resilient services, a recovery in manufacturing and agriculture, and an 8.6% increase in private investment.
The lender noted that fiscal consolidation, stronger foreign exchange reserves, improved access to international capital markets and recent sovereign credit rating upgrades have helped strengthen investor confidence. However, elevated energy prices and external uncertainties are expected to limit the pace of further economic growth.
ADB Country Director for Pakistan Emma Fan said continued implementation of economic reforms would be essential to attract private investment, strengthen resilience against external shocks and achieve stronger and more inclusive economic growth.
Pakistan’s inflation averaged 7.1% in FY2026, compared with 4.5% in FY2025, as higher food and global oil prices increased inflationary pressures during the second half of the fiscal year.
