World Bank lowers Pakistan’s GDP growth forecast to 2.6% amid flood damage

October 08, 2025 (MLN): The World Bank has revised down Pakistan’s economic growth forecast for the current fiscal year (FY2025-26) to 2.6%, citing the devastating effects of recent floods that have disrupted agricultural output and heightened inflationary pressures.

In its latest Regional Economic Outlook for the Middle East, North Africa, Afghanistan, and Pakistan (MENAAP), the Washington-based lender noted that the catastrophic floods have “damped the growth outlook,” cutting the projection by 0.5% points from its previous estimate of 3.1% published in April 2025.

The Government of Pakistan had initially targeted 4.2% GDP growth for the fiscal year, later adjusting its expectations to 3.5% in discussions with the International Monetary Fund (IMF).

According to the World Bank, agricultural output in Punjab province the country’s main farming region is expected to decline by at least 10%, impacting major crops such as rice, sugarcane, cotton, wheat, and maize.

The report also warned that inflation could rise to 7.2% as food supply disruptions continue. “While inflation eased to single digits in FY2024-25 due to stable food and energy prices, ongoing floods are expected to push inflationary pressures through 2027,” it said.

For FY2026-27, the Bank expects Pakistan’s growth to rebound to 3.4%, supported by improved agricultural performance, lower inflation and interest rates, and recovering consumer and investor confidence.

Highlighting Pakistan’s recent approval of a five-year tariff reform plan (2025–2030), the World Bank said the country could see long-term benefits for exports and economic growth by simplifying and halving its historically high and complex tariff structure.

However, the Bank projected a 1.5% decline in global exports due to broader trade disruptions and supply chain challenges.

Between 2011 and 2018, Pakistan’s poverty rate fell by 9.4% points, but the World Bank cautioned that a combination of economic shocks and natural disasters since 2020 has likely stalled progress in poverty reduction.

“Due to its relatively high poverty rate and large population, Pakistan accounts for a significant share of the MENAAP region’s poor,” the report added.

Overall, the World Bank projected that economies across the MENAAP region will expand by 2.8% in 2025 and 3.3% in 2026, driven by growth in non-oil sectors, private investment, and agriculture.

Gulf Cooperation Council (GCC) countries are expected to benefit from the gradual phasing out of voluntary oil production cuts, while oil-importing countries will see improvements through domestic spending and tourism recovery.

In contrast, oil-exporting developing nations could experience slower growth due to conflict and reduced oil output.

The report also emphasized the urgent need to empower women across the region, calling it one of the biggest untapped drivers of growth.

Currently, only one in five women in MENAAP participates in the labor force the lowest rate globally.

“I urge bold action not partial measures,” said Ousmane Dione, World Bank Vice President for the MENAAP region. “To unlock the full potential of women, we must tackle every barrier to their inclusion. A vibrant private sector that creates jobs and transforms aspirations is key to real progress.”

Roberta Gatti, the World Bank’s Chief Economist for the region, added that removing barriers to female employment could boost GDP per capita by 20% to 30% in economies like Egypt, Jordan, and Pakistan.

The report highlighted that Pakistan’s female labor-force participation increased by 8% points between 2000 and 2021, though it remains among the lowest globally.

Despite comparable aspirations and job application rates, two-thirds of college-educated women in Pakistan remain outside the workforce often due to societal pressures such as early marriage after graduation.

The MENAAP region’s working-age population is projected to grow by over 220m people by 2050, representing a 40% increase the second-largest globally. Yet, the region faces a looming demographic challenge with declining fertility and an aging population.

Pakistan, with one of the highest fertility rates in the region at 3.5, is expected to reach below-replacement fertility levels within a generation, following a similar demographic transition as its regional peers.

Among reformers, the report recognized Pakistan as one of the top five in the MENAAP region, with eight major reforms implemented since 2010 in areas such as workplace equality and pay. The United Arab Emirates, Saudi Arabia, Bahrain, and Jordan led the rankings

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