The Asian Development Bank (ADB) has projected Pakistan’s economy to maintain last year’s growth of 2.5% in the ongoing fiscal year and expand to 3% in the next fiscal year.
In its Asian Development Outlook April 2025, the multilateral bank said Pakistan’s economy is showing signs of stability and recovery on the back of tight macroeconomic policies and progress in economic reforms. The annual flagship publication said Pakistan’s GDP growth is supported by a more stable macroeconomic position, helped by the IMF Extended Fund Facility arrangement that began in October 2024. Adherence to the economic adjustment program is critical for building resilience and enabling sustainable and inclusive growth, it states.
“Pakistan’s economy has benefitted from improved macroeconomic stability through robust reform implementation in areas such as tax policy and energy sector viability,” said ADB Country Director for Pakistan Emma Fan. “Growth is projected to persist in 2025 and to increase in 2026. Sustained implementation of policy reforms is vital to buttress this growth trajectory and fortify fiscal and external buffers,” she said.
The ADB expects growth in FY2025 to be driven by a rebound in private sector investment linked to progress on reform measures, perceptions of greater economic stability, and a stable foreign exchange market. The successful implementation of an ongoing reform program is anticipated to continue creating a more stable macroeconomic environment and gradually remove structural barriers to growth. Economic activity in both the industrial and service sectors will benefit from recent monetary easing and macroeconomic stability. Additionally, strong remittance inflows, lower inflation, and monetary easing are likely to support aggregate demand.
Average inflation is projected to decline significantly to 6% in the ongoing fiscal before decreasing further to 5.8% in the next fiscal year. This trend is driven by continued moderation in food inflation, stable global oil and commodity prices, moderate domestic demand conditions, and a favorable base effect.
The report noted that female labor force participation remains low in Pakistan compared to regional and peer countries and enabling more women to work outside the home could boost productivity and output while advancing female empowerment. Continued investment in girls’ education and vocational training programs that equip women with the skills needed for the job market, while improving public transport and ensuring safe travel options, can reduce barriers for women entering the labor market, it said.
The growth forecasts were finalized prior to the April 2 announcement of new tariffs by the Trump administration, so the baseline projections only reflect tariffs that were in place previously. However, the report features an analysis of how higher tariffs may affect growth in Asia and the Pacific, stating it will likely moderate.