ISLAMABAD: Pakistan’s GDP growth is projected to remain at 3 percent in fiscal year 2025–26 and is expected to rise to 3.4 percent in fiscal year 2026–27, according to the World Bank’s latest Global Economic Prospects report. The growth trajectory is primarily driven by a recovery in agricultural production and reconstruction activities following the devastating floods that affected several regions in 2025.
Despite the projected growth, the World Bank warned that Pakistan’s current account deficit is likely to widen in FY2026–27. The anticipated increase is linked to higher import demand associated with economic recovery, coupled with a normalization of remittance inflows following the post-flood period. The report also noted that further increases in US tariffs could adversely affect exports in oil-importing economies like Pakistan and Tunisia, particularly in countries with concentrated export destinations.
The Bank highlighted that structural reforms promoting private sector activity could support growth in Pakistan by reducing informality, creating jobs, and boosting overall economic activity. Easing of import restrictions and the expansion of bank credit, partly facilitated by softer financial conditions, has already contributed to stronger industrial sector performance.
Pakistan, along with Morocco and Tunisia, has seen improvements in current account balances in recent years, aided by higher remittance inflows and tourism revenues. Inflationary pressures have eased across these oil-importing economies, driven in part by softening food prices. In Pakistan, this has allowed multiple policy rate reductions, although monetary policy has remained relatively restrictive to control inflation.
Globally, the World Bank report underscores that the international economy is more resilient than expected, despite persistent trade tensions and policy uncertainty. Global growth is forecasted to remain broadly stable over the next two years, easing slightly to 2.6 percent in 2026 before rising to 2.7 percent in 2027. The upward revision is largely attributable to stronger-than-anticipated growth in the United States, which accounts for roughly two-thirds of the increase in the 2026 forecast.
Nevertheless, the report warns that the 2020s are on track to be the weakest decade for global growth since the 1960s. The slow pace of expansion is contributing to widening disparities in living standards: by the end of 2025, nearly all advanced economies had per capita incomes exceeding 2019 levels, while approximately one in four developing economies had experienced declines.
In 2025, global growth received support from a surge in trade and adjustments in supply chains ahead of policy changes. However, these effects are expected to fade in 2026 as trade volumes and domestic demand normalize. Easing global financial conditions and fiscal stimulus measures in several large economies are projected to cushion the slowdown. Global inflation is expected to moderate to 2.6 percent in 2026, supported by softer labour markets and lower energy costs.
Looking ahead to 2027, the World Bank anticipates growth will pick up as global trade flows adjust and policy uncertainty diminishes, providing an improved outlook for Pakistan and other emerging economies. The report reinforces the importance of continued structural reforms, private sector development, and fiscal prudence in sustaining growth momentum.
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