The Asian Development Bank (ADB), in its July 2025 edition of the Asian Development Outlook (ADO), has projected Pakistan’s economy to grow by 3 percent in FY26, maintaining its previous estimate despite challenges in the regional and global trade environment. The update comes alongside a broader downward revision of economic forecasts for developing Asia, reflecting heightened uncertainty in international markets.
According to the report, Pakistan’s provisional growth estimate for FY25 has been revised slightly upward to 2.7 percent from the earlier projection of 2.5 percent made in April. This revision is attributed to stronger-than-expected performance in the country’s industrial and services sectors. However, agricultural output continued to underperform, as anticipated earlier in the fiscal year.
The projection of 3 percent growth for FY26 remains significantly below the Government of Pakistan’s own target of 4.2 percent. The ADB noted that while recent improvements in key sectors are encouraging, the overall pace of recovery remains modest and subject to downside risks stemming from both domestic and global conditions.
The report also highlighted a notable easing in inflationary pressures within Pakistan, driven by a sharper-than-expected decline in food and non-food prices during the first 11 months of FY25. As a result, ADB has revised downward its inflation forecast for FY25. However, the inflation outlook for FY26 remains unchanged, with price stability expected to continue into the new fiscal year.
At a regional level, the ADB has cut its growth projections for developing Asia and the Pacific. The region is now expected to grow by 4.7 percent in 2025, down 0.2 percentage points from the April forecast. For 2026, growth is projected at 4.6 percent, slightly lower than the earlier 4.7 percent estimate. The downgrade reflects global trade challenges, including escalating US-China trade tensions, tightening financial conditions, and continued supply chain disruptions.
China’s economic growth forecast remains unchanged at 4.7 percent for 2025 and 4.3 percent for 2026, supported by government policy interventions despite ongoing weaknesses in exports and property sector stress. Conversely, Southeast Asia has faced sharper downward revisions, with the region now expected to grow by 4.2 percent in 2025 and 4.3 percent in 2026, almost half a percentage point lower than previous forecasts.
South Asia’s performance continues to show variation across countries. India’s growth has been slightly revised downward to 6.5 percent for FY25 due to new US tariffs and emerging policy concerns, although it still retains its position as one of the world’s fastest-growing large economies. Inflation in India is now projected at 3.8 percent for FY25, helped by improved food supplies.
Meanwhile, countries in the Caucasus and Central Asia received a modest upgrade, with growth forecasts adjusted upward by 0.1 percentage point to 5.5 percent in 2025 and 5.1 percent in 2026. This reflects anticipated gains in oil production and stronger export flows.
ADB also lowered its regional inflation forecast for developing Asia, now expecting inflation to ease to 2 percent in 2025 and 2.1 percent in 2026, compared to earlier estimates of 2.3 percent and 2.2 percent. The decline is attributed to reduced oil prices and strong agricultural output across several economies.
While the updated outlook suggests some relief on the inflation front, the ADB cautioned that persistent risks such as geopolitical instability, rising energy prices, and underwhelming investment performance could weigh on the growth trajectories of many economies, including Pakistan.