The World Bank has reduced Pakistan’s GDP growth forecast for FY2026 to 3%, citing rising inflation and external economic pressures in its latest regional update.
Earlier, it had projected growth at 3.4%. The economy is estimated to have grown by 3.1% in FY2025.
Inflation is expected to rise to an average of 7.4% in FY2026, compared to 4.5% last year, due to continued price pressures. The current account is also projected to shift from a surplus of 0.5% of GDP to a deficit of 1.2%.
The report highlighted regional instability, including tensions in the Middle East and Afghanistan-Pakistan relations, as key risks. Higher energy prices, supply disruptions, and weaker investor sentiment may further impact growth.
Despite challenges, the fiscal deficit is expected to narrow to 4.3% of GDP. The World Bank stressed that reforms and fiscal discipline are essential for stability and long-term economic recovery.