Pakistan’s economy showed resilience in the first quarter of fiscal year 2026 (July-September 2025), with real GDP growth clocking in at 3.71%, according to data analyzed by Arif Habib Limited based on Pakistan Bureau of Statistics (PBS) figures. This marks a significant improvement from the 1.56% growth recorded in the corresponding quarter of FY25 (1QFY25), reflecting a stronger recovery amid ongoing challenges such as fiscal adjustments, energy price reforms, and lingering effects from previous floods.
Sectoral Performance Drives Momentum
The industrial sector emerged as the standout performer, surging by 9.4% in 1QFY26, a sharp contrast to the near-stagnant 0.1% in 1QFY25. This robust expansion was fueled by improved manufacturing output (up 4.8%), large-scale manufacturing gains, and a remarkable rebound in electricity, gas, and water supply (over 120% growth in some sub-sectors), alongside strong construction activity at 21.0%. These gains highlight the benefits of stabilizing energy supplies, policy support for industry, and increased infrastructure spending.
Agriculture contributed positively with 2.9% growth, driven by steady livestock performance and forestry, though crops faced mixed results with declines in important crops. The services sector grew moderately at 2.4%, supported by wholesale/retail trade, transportation, accommodation, and financial activities, despite some volatility in communication.
This quarterly performance aligns with revised FY25 figures, where GDP growth accelerated progressively from 1.56% in Q1 to 6.17% in Q4, culminating in an annual average around 3%. The latest data signals a potential shift toward more balanced and sustainable expansion in FY26, bolstered by industrial recovery.
Analysts view the 3.71% figure as encouraging, especially given external pressures, and expect continued momentum if reforms persist and external conditions remain favorable.