The Asian Development Bank (ADB) said on Friday that Pakistan’s economy has stabilised and begun to show stronger momentum, but warned that “downside risks are significant”. The ADB stated that recent improvements in growth and a decline in inflation reflect progress supported by tight macroeconomic policies and ongoing economic reforms. However, it cautioned that external and fiscal pressures continue to pose challenges to long-term stability.
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The Asian Development Bank states that Pakistan economy recovers during fiscal year 2025 as growth improves and inflation declines. This improvement links with tight macroeconomic policies and ongoing economic reforms.
The report highlights that Pakistan economy outlook ADB report reflects both progress and vulnerability at the same time.
Growth strengthens as inflation slows
The Asian Development Bank notes that Pakistan economy shows recovery supported by falling inflation and better fiscal control. Economic activity improves during FY2025, which ends on June 30.
According to the report, structural reforms help stabilize macroeconomic conditions. These reforms also support investor confidence and external balance.
ADB Country Director for Pakistan Emma Fan says Pakistan economy shows stronger momentum. She notes that reforms remain critical for long-term stability.
GDP growth forecast shows gradual improvement
The Asian Development Outlook April 2026 projects steady growth for Pakistan economy in coming years. Real GDP growth is expected to reach 3.5 percent in FY2026.
It further increases to 4.5 percent in FY2027. This compares with 3.1 percent growth recorded in FY2025.
The report suggests that manufacturing recovery and higher investment drive this growth trend. Private sector activity also supports expansion.
Pakistan economy outlook ADB report emphasizes that sustained reform remains key for maintaining this momentum.
Inflation expected to rise in coming years
The report also warns that inflation may increase in future fiscal years. Average inflation may reach 6.4 percent in FY2026 and 6.5 percent in FY2027.
Rising oil prices and global supply disruptions contribute to this pressure. Trade route instability linked to geopolitical tensions also adds risk.
ADB states that inflation control depends on careful monetary policy and external stability.
Monetary policy expected to remain cautious
The central bank is expected to follow a cautious monetary policy approach. The goal remains to stabilize inflation within a 5 to 7 percent target range.
Policy easing may support growth, but authorities must balance it with inflation risks.
The report suggests that monetary decisions will play a key role in shaping Pakistan economy outlook ADB report results in coming years.
Investment and reform drive future growth
The report highlights that future growth depends on private sector investment. Recent reforms improve investor confidence and stabilize foreign exchange conditions.
Construction activity is expected to rise due to fiscal incentives introduced in the FY2026 budget. Reconstruction efforts after floods also support economic activity.
Industry and services sectors both benefit from improved monetary conditions.
ADB notes that reform implementation is essential for long-term sustainability.
External risks remain a major concern
Despite improvement, Pakistan economy faces significant external risks. Global uncertainty remains a key challenge for stability.
A prolonged Middle East conflict could increase energy and fertilizer costs. This may reduce agricultural and industrial output.
It may also reduce remittance inflows and widen current account deficit.
ADB warns that Pakistan must continue adjustment programs to strengthen resilience.
Pakistan economy outlook ADB report stresses that external shocks remain a serious threat.
Fiscal pressure and structural challenges continue
Fiscal stability remains another concern for Pakistan economy. External borrowing requirements and import costs may increase pressure.
Structural barriers also slow down long-term growth potential. These include energy inefficiencies and limited industrial productivity.
ADB highlights that policy consistency and reform continuity remain essential.
Without reforms, economic gains may weaken quickly under global pressure.
Construction and services sector show improvement
Despite risks, some sectors show positive movement. Construction activity increases due to fiscal incentives and rebuilding projects.
Services sector also benefits from improved liquidity and consumer activity. These sectors contribute to overall improvement in Pakistan economy outlook ADB report findings.
However, it also warns that risks remain significant.
Global uncertainty, inflation pressure, and fiscal challenges continue to threaten long-term stability.