S&P Global flags downside risks to Pakistan outlook, sees slower growth

S&P Global Market Intelligence has highlighted heightened downside risks to Pakistan’s economic outlook, citing elevated global tariff uncertainty, volatile commodity prices and growing geopolitical fragmentation, while projecting slower economic growth than the country’s central bank.

In its latest assessment, S&P Global Market Intelligence — a separately managed division of S&P Global and distinct from S&P Global Ratings — said risks are skewed to the downside amid an uncertain global trade environment and price swings in key commodities. It noted that upside risks could emerge from volatility in global commodity markets and domestic wheat prices, potential adjustments in administered energy tariffs, and a stronger-than-assumed pickup in domestic demand.

S&P Global Market Intelligence projected Pakistan’s real gross domestic product to expand by 3.5% in fiscal year 2026, before strengthening to 4.4% in fiscal year 2027. The projections are below those of the State Bank of Pakistan, which recently raised its growth outlook.

The central bank now expects real GDP growth in the range of 3.75% to 4.75% in fiscal year 2026, citing stronger-than-anticipated momentum in commodity-producing sectors and spillover effects into services. The State Bank said this momentum is likely to extend into fiscal year 2027, supported by earlier monetary easing and continued macroeconomic stability.

On the external front, the State Bank projects the current account deficit to remain contained within 0% to 1% of GDP in fiscal year 2026. It expects foreign exchange reserves to surpass $18 billion by the end of June 2026, supported by steady remittance inflows and planned official financing, and to rise further in fiscal year 2027 toward the benchmark of three months of import cover.

By comparison, S&P Global Market Intelligence forecasts a current account deficit of about 0.5% of GDP in calendar year 2026, widening to 1.3% in 2027.

Inflation expectations also differ modestly. The State Bank expects inflation to stabilize within its 5% to 7% target range over the next two years, after temporarily exceeding the upper bound for a few months during calendar year 2026. S&P Global Market Intelligence projects inflation at 5.1% in 2026, edging up to 5.6% in 2027.

Together, the assessments underscore both improving macroeconomic stability and lingering vulnerabilities tied to global conditions and domestic price dynamics.