Asian Development Bank keeps Pakistan's growth forecast at 3.7pc

ISLAMABAD: The Asian Development Bank (ADB) on Wednesday forecast Pakistan’s economic growth rate at 3. 7 per cent — lower than the 4pc budget target — and inflation at 8. 3pc — higher than the official estimate of 7pc for the current fiscal year — amid downside risks stemming from the conflict in the Middle East. “Pakistan’s gross domestic product growth is projected to remain at 3. 7pc in FY2027”, the Manila-based lending agency said in its Asian Development Outlook September episode. In its latest outlook, ADB has maintained its July forecast of 3. 7pc. It had earlier projected a 4. 5pc growth rate for the current fiscal year in its April 2026 forecast. “Average inflation is projected to rise to 8. 3pc in FY27, above the central bank’s medium-term target range of 5pc–7pc, as elevated energy, logistics, and agricultural input costs continue to affect domestic prices”, it added.

The bank warned that the economic outlook was subject to significant downside risks. An escalation of the Middle East conflict could increase energy import costs, intensify inflation, and disrupt labour markets in Gulf economies, affecting workers’ remittances. “The reintroduction of austerity measures by the Pakistan government could also weigh on domestic demand and economic activity, particularly if expenditure restraint is more pronounced than anticipated, posing an additional downside risk to the economic outlook”, the ADB noted. It also highlighted other risks including tighter global financing conditions, shortfalls in tax revenue, weather-related agricultural shocks, and delays in energy-sector and state-owned enterprise reforms. The ADB emphasised consistent implementation of reforms as critical to reinforcing fiscal and external stability and sustaining investor confidence. It noted that…