World Bank sees Pakistan growth picking up to 3.4% by FY27

Pakistan’s economy is expected to grow steadily over the next two fiscal years, supported by easing financial conditions, a recovery in agriculture and reconstruction efforts after floods, but the country faces rising external risks from higher imports and potential trade shocks, the World Bank said.

In its latest Global Economic Prospects report, the World Bank projected Pakistan’s gross domestic product growth at 3% in fiscal year 2025-26, before rising to 3.4% in fiscal year 2026-27. The improvement is expected to be driven by a rebound in agricultural production and reconstruction following a series of floods in 2025.

The Bank said economic activity in Pakistan has strengthened, particularly in the industrial sector, as a result of relaxed import restrictions and an expansion of bank credit, partly reflecting easing financial conditions.

At the same time, Pakistan’s current account deficit is projected to widen in fiscal year 2026-27 as stronger growth fuels higher import demand and remittance inflows normalize after post-flood recovery.

Among oil-importing countries, including Pakistan, inflation has declined mainly due to softer food prices, the report said. This has allowed multiple policy rate cuts, including in Pakistan, although monetary policy remains restrictive in several economies to ensure inflation is kept under control.

The World Bank warned that further increases in U.S. tariffs could significantly hurt exports in several oil-importing economies, particularly Pakistan and Tunisia. Countries with more concentrated export destinations would be especially vulnerable to trade-related shocks, it added.

The report also highlighted potential upside risks. In Pakistan and Morocco, deeper-than-expected regulatory reforms aimed at promoting private sector activity could boost growth, reduce informality and create jobs.

Among oil importers, current account balances have improved in recent periods in Pakistan, Morocco and Tunisia, partly due to higher remittances and tourism revenues, the Bank said.

Globally, the World Bank said the economy has proven more resilient than expected despite persistent trade tensions and policy uncertainty. Global growth is projected to ease to 2.6% in 2026 before edging up to 2.7% in 2027, an upward revision from the Bank’s June forecast.

The resilience largely reflects stronger-than-anticipated growth in the United States, which accounts for about two-thirds of the upward revision to the 2026 outlook. Even so, the Bank cautioned that if current forecasts hold, the 2020s are on track to be the weakest decade for global growth since the 1960s.

Sluggish growth is widening global income gaps, the report said. By the end of 2025, nearly all advanced economies had per capita incomes above 2019 levels, while about one in four developing economies remained below pre-pandemic levels.

Growth in 2025 was supported by a surge in trade ahead of policy changes and rapid adjustments in global supply chains, but these factors are expected to fade in 2026 as trade and domestic demand soften. Easing global financial conditions and fiscal expansion in several major economies should help cushion the slowdown, the Bank said.

Global inflation is projected to ease to 2.6% in 2026 due to softer labor markets and lower energy prices, with growth expected to pick up again in 2027 as trade flows adjust and policy uncertainty diminishes.