ADB cuts Pakistan's FY27 growth forecast, raises inflation outlook

The Asian Development Bank (ADB) lowered Pakistan's economic growth forecast for fiscal year 2026-27 and raised its inflation outlook, warning that higher energy costs, external uncertainty and risks to workers' remittance inflows could weigh on the country's economic recovery.

In its Asian Development Outlook (ADO) July 2026, the Manila-based lender forecast Pakistan's gross domestic product (GDP) growth at 3.7% for FY2027. It also projected average inflation at 8.3% during the fiscal year, citing elevated food and fuel prices and continued disruptions in global energy markets caused by the conflict in the Middle East.

The ADB said Pakistan's economy expanded 3.7% in FY2026, which ended on June 30, supported by broad-based growth in the industrial and services sectors, while agriculture recorded more modest growth.

The lender estimated average inflation at 7.2% for FY2026, reflecting higher food and fuel prices.

It said elevated energy prices and persistent external uncertainty are expected to keep inflationary pressures high, posing challenges to Pakistan's economic recovery.

The ADB also downgraded its outlook for developing Asia and the Pacific, forecasting regional economic growth of 4.9% in 2026, down from 5.5% in 2025 and 0.2 percentage points lower than its April forecast.

It attributed the weaker regional outlook to prolonged disruptions in global energy markets stemming from the conflict in the Middle East, which have had a greater-than-expected impact on economic activity across the region.

Despite the downgrade for 2026, the ADB maintained its regional growth forecast for 2027 at 5.1%, expecting activity to recover gradually as energy market disruptions ease.

The report said disruptions in global energy markets are likely to unwind only gradually despite a framework agreement reached in June. It added that the impact has spread beyond energy prices to fertilizers, other commodities and global supply chains, contributing to persistent inflationary pressures across the region.