Pakistan’s GDP growth seen at 3.8% in FY27, inflation to hit 8.2%

October 22, 2026 (MLN): Pakistan’s economic growth is forecast to accelerate to 3.8% in fiscal year 2026–27 (FY27), while inflation is expected to climb to 8.2% amid higher commodity prices and domestic food costs, according to the World Bank.

The Middle East conflict is likely to weigh on economic activity, with energy and commodity prices expected to return to pre-conflict levels only in the second half of FY27.

Headline inflation is projected to increase from 7.1% in FY26 to 8.2% in FY27, showing persistent pressure from international commodity markets and domestic food prices.

Agricultural performance is expected to face challenges from El Niño-related weather conditions and rising fertilizer costs during the Rabi season. While livestock is likely to remain the principal contributor to agricultural growth, crop production is projected to recover gradually.

Industrial growth is expected to improve slightly, supported by manufacturing and construction activity. Construction is likely to benefit from property tax reductions introduced in the FY27 budget.

Growth in the services sector, however, is projected to remain broadly at the FY26 level, as high inflation and a gradual agricultural recovery continue to limit expansion in wholesale and retail trade.

Over the medium term, Pakistan’s economic growth is expected to improve progressively, reaching approximately 4.5% by FY31. The projected recovery is expected to be supported by the normalization of commodity prices, easing inflation and lower agricultural input costs.

Inflation is forecast to decline to 7% in FY28 before rising to 7.5% in FY29 ahead of the general election. It is then expected to stabilize at around 7% in FY30.

On the external front, Pakistan’s current account deficit is projected to widen in FY27 as stronger domestic demand drives imports to expand faster than exports.

However, robust workers’ remittances are expected to cover most of the trade deficit, helping contain the current account shortfall below 1% of gross domestic product (GDP).

Official financing inflows and renewed access to international bond markets are expected to sustain a surplus in the financial account.

The baseline outlook assumes that Pakistan will not undertake major new structural reforms and that fiscal easing will remain more limited in the run-up to the 2029 general election.

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