Pakistan’s economy to grow 3.5% in FY2026

April 10, 2026 (MLN):  Pakistan’s economic landscape is showing signs of steady revitalization, with gross domestic product (GDP) growth  projected to climb to 3.5% in the fiscal year 2026.

This anticipated acceleration marks a continued upward trend from the 3.1% growth recorded in FY2025 and is expected to gain even further momentum, reaching 4.5% by FY2027.

The optimistic outlook for the coming year is primarily anchored in a quicker-than-anticipated recovery within the manufacturing sector, particularly large-scale manufacturing which saw a strong 4.8% rebound in the first half of FY2026 across the textile, cement, and automobile industries.

Additionally, flood-related crop damage was less severe than initially feared, providing a more stable foundation for the broader economy as it moves into the next fiscal cycle.

The Asian Development Bank (ADB) in its recent report highlights that this positive trajectory is the result of prudent macroeconomic policies and essential stabilization measures that have successfully boosted market confidence.

According to the ADB’s analysis, the easing of monetary policy following a dramatic fall in inflation during 2025 has created a more accommodative environment for private investment.

While the current account is expected to return to a modest deficit due to rising global energy prices linked to Middle East instability, the ADB notes that resilient worker remittances and continued fiscal discipline remain critical pillars for maintaining this newfound stability.

The following table summarizes the key growth and inflation projections:

Looking ahead, the sustainability of this growth depends on the government's ability to maintain fiscal targets, such as the 2.6% primary surplus aimed for in the FY2026 budget.

The industrial sector is expected to remain a primary driver, supported by a 21% surge in construction activities fueled by post-flood reconstruction efforts and specific fiscal incentives.

However, the ADB warns that external risks, particularly geopolitical tensions that could disrupt energy supplies or trade routes, remain significant factors that could influence domestic inflation and the overall external position.

By continuing to pursue structural transformations including the privatization of state-owned enterprises and the modernization of agricultural value chains Pakistan aims to break the historical "boom-bust" cycle and secure long-term improvements in living standards.

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