ISLAMABAD: The Asian Deve­lopment Bank (ADB) has projected Pakistan’s economy to grow at a steady pace of 3pc in FY26, even as it lowered growth forecasts for the broader Asian region amid global trade uncertainty.

In its Asian Development Outlook (ADO) July 2025, released on Wednesday, the ADB noted that Pakistan’s provisional growth for FY25 was revised upward to 2.7pc, from its earlier projection of 2.5pc issued in April. However, the forecast for FY26 remains unchanged at 3pc—well below the government’s target of 4.2pc.

The upward revision for FY25 reflects a better-than-expected performance in the industrial and services sectors, although agricultural output declined as anticipated. The report also noted a sharper-than-expected drop in food and non-food prices over the first 11 months of FY25, prompting a downward revision in Pakistan’s inflation forecast for the fiscal year, while the FY26 outlook remains unchanged.

Regionally, the ADB downgraded its growth forecasts for developing Asia and the Pacific due to expectations of weaker exports, higher US tariffs, and uncertain global trade conditions. The region is now expected to grow by 4.7pc in 2025, down 0.2 percentage points from the April forecast. Growth for 2026 is revised to 4.6pc from the earlier 4.7pc.

Revises GDP expansion for FY25 to 2.7pc on improved industrial and services performance

The bank warned that growth in developing Asia could be further undermined by escalating US-China trade tensions, global supply chain disruptions, rising energy prices, and deepening property sector troubles in the People’s Republic of China (PRC).

China’s growth outlook was left unchanged at 4.7pc for 2025 and 4.3pc for 2026, with government policy support expected to offset continued weaknesses in exports and the property market.

Southeast Asia is likely to be the hardest hit by worsening trade conditions, with growth now projected at 4.2pc in 2025 and 4.3pc in 2026, nearly half a percentage point lower than earlier forecasts.

Conversely, projections for the Caucasus and Central Asia have been revised slightly upward by 0.1 percentage point for both years to 5.5pc and 5.1pc, respectively, largely due to expected increases in oil production.

Inflation in developing Asia is projected to ease further due to lower oil prices and robust agricultural output. The regional inflation forecast has been revised to 2pc for 2025 and 2.1pc for 2026, compared to April’s estimates of 2.3pc and 2.2pc, respectively.

In South Asia, growth expectations vary by country. The Indian economy is now projected to expand by 6.5pc in FY25—slightly down from the earlier 6.7pc—amid the impact of new US tariffs and increased policy uncertainty. Nonetheless, India remains one of the fastest-growing major economies. Its inflation forecast has been revised downward to 3.8pc for FY25, reflecting improved food supplies due to strong agricultural output.

Sri Lanka experienced broad-based growth in Q1 2025, but the annual forecast was lowered due to uncertainties around US tariffs and concerns over under-execution of capital spending.

Published in Dawn, July 24th, 2025