According to the World Economic Outlook released by the International Monetary Fund in January 2026, global economic growth is expected to moderate, with a projected growth rate of 3.3 percent in 2025 and 2026, slightly easing to 3.2 percent in 2027. Meanwhile, the Global Economic Prospects report by the World Bank anticipates a more modest global growth trajectory, with rates slowing from 2.7 percent in 2025 to 2.6 percent in 2026 before rebounding to 2.7 percent in 2027. This moderation largely stems from weaker trade activity, firms scaling back inventory accumulation, and the pronounced effects of tariffs, alongside inflationary pressures.
Recent data reinforce these trends. In December 2025, the global economic expansion decelerated, with the J.P. Morgan Global PMI Composite Output Index falling to 52.0, its lowest level in six months. Global purchasing activity and inventory levels also declined, reflecting subdued conditions and weakening demand expectations. Additionally, divergence in growth across economies has been observed, with the United States expected to grow at 2.4 percent in 2026, moderating to 2.0 percent in 2027, while the Euro Area is projected to expand at 1.3 percent in 2026 and 1.2 percent in 2027. China is forecast to see growth of 4.0 percent in 2026 and 4.4 percent in 2027, constrained by slow productivity growth, high debt, and demographic challenges.
The global outlook also faces downside risks, including potential reassessments of productivity gains, financial market corrections, geopolitical tensions, and fiscal pressures. Despite these challenges, factors such as easing trade tensions and resilient business dynamics could support sustainable growth. Trade volumes are expected to expand modestly, with global growth projected at 2.6 percent in 2026 and 2.8 percent in 2027, according to IMF forecasts.
On the commodity front, the FAO Food Price Index averaged 124.3 points in December 2025, slightly down from November. Prices of dairy, meat, and vegetables rose but were offset by declining cereals and sugar prices. Energy costs decreased by 1.3 percent in December, while non-energy prices rose 1.3 percent. Metals and fertilizers saw price increases, reflecting gradual stabilization amid evolving global demand patterns. Forward-looking indicators, such as the U.S. Weekly Economic Index, remain supportive, highlighting continued growth potential in major export markets, including Pakistan.
At the national level, Pakistan’s economic indicators reveal a nuanced picture. Remittances reached $19.7 billion in FY2026, up 10.6 percent from FY2025, while exports and imports saw mixed trends. The fiscal balance remains manageable, with FBR revenues increasing to 6,160 billion PKR in FY2026. Monetary policy remained accommodative, with credit to the private sector rising and policy rates steady. The real sector saw CPI inflation moderate to 5.6 percent by December 2026, while the large-scale manufacturing sector posted modest growth.
Financial markets mirrored these developments. The Pakistan Stock Exchange recorded significant gains, with market capitalization increasing to 21.16 trillion PKR by FY2026, reflecting investor confidence amid cautious optimism. Overall, while Pakistan and global economies face challenges including inflation, trade constraints, and fiscal pressures, measured recovery trends and policy interventions offer a cautiously optimistic outlook for 2026 and beyond.
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