Editorial
ISLAMABAD: Pakistan’s economy is projected to grow at a modest pace of 2.6% in the fiscal year 2025–26, as persistent flood damage and renewed inflationary pressures continue to strain recovery, the World Bank said in its latest Middle East, North Africa, Afghanistan & Pakistan (MENAAP) economic outlook released Tuesday.
The report estimated Pakistan’s real GDP growth at 2.7% in FY 2024–25 — only slightly higher than last year’s 2.5% — but warned that ongoing catastrophic floods, particularly in Punjab, had reduced agricultural output by around 10%, hitting key crops including rice, sugarcane, wheat, cotton, and maize. The Bank projects growth to pick up to 3.4% by FY 2026–27, supported by better harvests, easing inflation, and a rebound in private consumption and investment.
Inflation, which temporarily fell to single digits in FY 2024–25 due to stable food and energy prices, is expected to rise again through 2027 as floods disrupt supply chains. Despite this, the report acknowledged that structural reforms — particularly the government’s newly approved five-year tariff reduction plan (2025–2030) — could enhance export competitiveness and drive long-term growth.
The World Bank also noted Pakistan’s persistent poverty challenge. While poverty rates fell significantly between 2011 and 2018, a mix of economic shocks and climate disasters since 2020 has stalled progress. With its large population and relatively high poverty rate, Pakistan now represents a major share of the MENAAP region’s poor.
Highlighting demographic trends, the report said Pakistan’s fertility rate remains among the highest in the region but is expected to fall below replacement level within a generation. It added that removing barriers to female labor participation could increase Pakistan’s GDP per capita by as much as 30% — among the highest potential gains globally.
