ADB raises Pakistan’s growth outlook as food prices stabilize after floods

Pakistan’s economic growth outlook has strengthened for 2025 and 2026 as prices of key food items begin to stabilize after spiking in the months following last year’s floods, the Asian Development Bank (ADB) said in a new report.

In its Asian Development Outlook: Growth Steadies but Uncertainty Lingers, the ADB said 2026 growth forecasts for South Asia have been revised upward for Pakistan and Sri Lanka because of increased public investment and a less severe impact from flooding than initially expected.

Pakistan’s growth outlook for fiscal year 2024-25 was upgraded following a stronger-than-expected fourth quarter. Forecasts for other South Asian economies remain unchanged, though Nepal continues to face uncertainty after civil unrest in September and ongoing political transition, the report said.

The ADB noted that Pakistan’s government has revised its GDP growth estimate for FY25 to 3%, up from an earlier 2.7% projection. Despite disruptions from the June flooding, the economy expanded 5.7% in the fourth quarter, and large-scale manufacturing has grown robustly in recent months of FY26.

The Bank also warned of “economic water scarcity” in Pakistan.

Inflation in the first four months of FY26 eased to 4.7%, down from 8.7% in the same period a year earlier. After surging in the months immediately following the floods, prices of essential food items have now begun stabilizing, the report said.

The ADB has also raised its growth forecasts for developing Asia and the Pacific for this year and next, citing stronger-than-expected exports and reduced trade uncertainty after several U.S. trade agreements were finalized. Robust shipments of semiconductors and other technology goods, moderating inflation, and stable financial conditions have lifted the region’s outlook.

The region’s economy is now expected to grow 5.1% this year, up from a 4.8% forecast in September, and 4.6% next year, an increase of 0.1 percentage points.

“Asia and the Pacific’s solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty over the past year,” ADB Chief Economist Albert Park said. He added that although recent trade agreements have eased risks, governments must continue to promote open trade and investment to sustain resilience.

Risks to the regional outlook include renewed trade tensions, financial market volatility, geopolitical pressures, and a deeper-than-expected slump in the People’s Republic of China’s property market.

Inflation in developing Asia and the Pacific is expected to ease to 1.6% this year, down from a 1.7% projection in September. The forecast for next year remains at 2.1%.