ISLAMABAD: The Asian Development Bank (ADB) on Wednesday upgraded Pakistan’s economic growth forecast for the current fiscal year due to a less severe-than-anticipated impact of flooding, increased public investment, and anticipated stabilising inflation.

In its Asian Development Outlook December 2025, the Manila-based lending agency also revised the growth outlook for the South Asian Region upward for the current year.

“In the case of South Asia, growth forecasts for 2026 have been revised upward for Sri Lanka and Pakistan, respectively, due to increased public investment and a less-severe-than-anticipated impact of flooding,” it said in its latest report without actually saying where it expected Pakistan’s growth to settle for the year. In July, the ADB had set a 2026 growth forecast for Pakistan at 3pc and had kept it unchanged in its September update in the middle of flooding across Punjab’s agricultural heartland.

“The growth outlooks for Pakistan and Sri Lanka have improved for both 2025 and 2026”, it said, adding that the Government of Pakistan updated its estimate of GDP growth for FY25 to 3pc from a previously reported 2.7pc. “Despite disruptions that resulted from floods in June 2025, the economy grew 5.7pc in Q4FY25, and the country’s large-scale manufacturing expanded robustly in recent months in FY26”, it said.

Sees robust growth for South Asia for 2025 and 2026 despite challenges

Pakistan’s inflation for the first four months (July-October) of FY26 was 4.7pc, down from 8.7pc in the same period a year ago, the bank said, adding “after a sharp increase in the months immediately after the floods, prices of key food items have begun to stabilise”.

It forecast the growth in South Asia to remain robust, with the 2025 forecast revised upward to 6.5pc from 5.9pc, and the 2026 forecast maintained at 6pc. This is driven by upgrades to India’s outlook, based on robust domestic consumption growth. Sri Lanka’s forecasts for 2025 and 2026 are revised upward due to robust credit expansion, buoyant consumption, and improved investor confidence following rating upgrades.

In contrast, Bangladesh’s fiscal year ending June 30, 2026 projection was lowered due to weaker exports amid subdued global demand and supply disruptions, while the forecast for FY2025 remains unchanged. Pakistan’s FY2025 growth outlook was upgraded following a stronger-than-expected Q4, it said.

Growth forecasts for the remaining South Asian economies are retained, although Nepal faces lingering uncertainty in the aftermath of September’s civil unrest and the ongoing political transition.

India’s growth forecast for FY2025 (fiscal year ending March 2026) was revised to 7.2pc from 6.5pc in the September ADO, reflecting stronger third-quarter expansion as tax cuts supported consumption. Indian GDP grew faster than expected at 8.2pc in the second quarter of FY25. The 2026 forecast was kept unchanged at 6.5pc. The bank also raised its growth forecasts for economies in developing Asia and the Pacific for this year and next, amid stronger-than-expected exports and reduced trade uncertainty following the conclusion of several trade agreements with the United States.

Risks to the regional outlook include renewed trade tensions and financial market volatility, as well as geopolitical pressures and a worse-than-expected deterioration in the People’s Republic of China’s (PRC) property market. China’s growth forecast for this year has been raised slightly to 4.8pc from 4.7pc, amid resilient exports and continued fiscal stimulus. The outlook for 2026 was kept unchanged at 4.3pc.Southeast Asia’s growth projection for this year was also upgraded by 0.2 percentage points to 4.5pc, reflecting a strong third quarter in Indonesia, Malaysia, Singapore, and Vietnam.

Published in Dawn, December 11th, 2025