The Asian Development Bank (ADB) has maintained its forecast for Pakistan’s economic growth at 3.7% for fiscal year 2027, while projecting average inflation to rise to 8.3%. The latest figures were released in the ADB’s Asian Development Outlook September 2026 on Wednesday, September 23.
The 3.7% growth projection is below the 4% target set by the Pakistani government for FY27. ADB had previously reduced its forecast to 3.7% in July after projecting 4.5% growth in its April outlook.
Pakistan’s Economy Grew 3.7% in FY26
According to the latest ADB assessment, Pakistan’s economy expanded by 3.7% in FY2026, which ended on June 30, compared with 3.2% growth in FY2025.
The improvement was supported by stronger services activity, a recovery in manufacturing and agriculture, and increased private investment. ADB data cited by APP also shows agriculture grew 2.9%, while private investment increased by 8.6% during FY26.
However, economic activity slowed during the final quarter of FY26 amid the effects of the conflict in the Middle East.
Inflation Expected to Reach 8.3%
The ADB expects Pakistan’s average inflation to rise to 8.3% in FY27, compared with 7.1% recorded during FY26. The projected rate is above the State Bank of Pakistan’s medium-term target range of 5% to 7%.
The bank attributed the inflation outlook to continued pressure from energy, logistics and agricultural input costs. Higher global energy prices could also increase domestic costs and put additional pressure on consumers and businesses.
Middle East Conflict Creates Economic Risks
ADB warned that an escalation of the Middle East conflict could increase Pakistan’s energy import costs and push inflation higher. Disruption to labour markets in Gulf economies could also affect remittances sent by Pakistani workers.
Other risks identified by the bank include tighter global financing conditions, weaker-than-expected tax collection, weather-related shocks affecting agriculture, and delays in energy-sector and state-owned enterprise reforms.
The ADB also noted that renewed austerity measures could weaken domestic demand and economic activity if government spending restrictions become more extensive than expected.
The bank said continued economic reforms, stronger external buffers and improved investor confidence will remain important for Pakistan’s economic outlook.
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