The World Bank on Tuesday reduced its growth forecast for Pakistan in the ongoing fiscal year from 3.1% to 2.6%, citing this year’s floods, which are expected to up average inflation to 7.2%.
“For FY 2025/26, real GDP growth is projected to remain around 2.6%, as ongoing catastrophic floods have damped the forecast,” said the lender in its regional economic outlook for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) region. The latest estimate is significantly lower than Pakistan’s growth target of 4.2%.
“Early estimates suggest a drop of at least 10% in agricultural output in Punjab, affecting major crops such as rice, sugarcane, cotton, wheat, and maize,” read the report. “For FY 2026/27, growth is expected to accelerate to 3.4%, supported by higher agricultural output, lower inflation and interest rates, recovering consumer and business confidence, and a rebound in private consumption and investment,” it added.
According to the report, Pakistan’s exports and growth will benefit from the government’s five-year reform plan (2025–2030), aiming to reduce tariffs by half. It noted that the country’s inflation rate had dropped to single digits in FY2024-25 due to easing in prices of food and energy. However, it warned, disruption to food supply chains due to the floods would likely push inflation up through 2027. The prevailing conditions, it said, would also likely reduce exports by 1.5%.
The World Bank also noted that Pakistan’s poverty rate had dropped by 9.4% between 2011 and 2018 but a combination of economic shocks and natural disasters since 2020 had stalled this reduction trend. It said the country’s relatively high poverty rate and large population made it a large contributor to poverty in MENAAP.
Regionally, the report projected improved economic outlook but warned that global uncertainty, trade policy shifts, and continued conflict and displacement posed potential risks.
It also called for regional states to utilize the full potential of women in the workforce to improve their economies, stating that data shows only about one in five women participates in the labor force. In Pakistan, it said, removing barriers that prevent women from accessing jobs could boost GDP per capita by 20-30%.