ISLAMABAD: The Asian Development Bank (ADB) on Thursday left its forecast for Pakistan’s economic growth unchanged at 3.7 per cent and projected inflation at 8.3pc for the current fiscal year, slightly higher than the government’s estimate.

In its Asian Development Outlook (ADO) July 2026, the Manila-based lender, however, lowered its growth forecast for developing Asia and the Pacific to 4.9pc for 2026 from 5.5pc in 2025, marking a 0.2-percentage-point reduction from its April projections.

Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region’s prospects than anticipated, according to the ADB’s latest economic outlook released on Thursday. The lender maintained its 2027 growth forecast at 5.1pc, reflecting an expected recovery in economic activity as these pressures ease.

The ADB’s outlook expects disruptions to global energy markets to ease only gradually despite a framework agreement signed in June.

With the impact extending beyond energy to fertilisers, other commodity prices and supply chains, inflationary pressures are likely to persist.

Regional inflation is now forecast at 4.3pc this year, up from 3pc in 2025 and 0.7 percentage points higher than projected in April. The inflation forecast for 2027 remains unchanged at 3.4pc.

“Durable implementation of the framework agreement would help normalise global energy markets, but the pace of adjustment is highly uncertain, with significant downside risks,” ADB Chief Economist Albert Park said.

“Economic growth in developing Asia and the Pacific remains resilient, but persistent headwinds caused by the conflict require a careful policy balance between supporting growth and containing inflation,” he added.

The ADB warned that renewed conflict escalation and prolonged geopolitical uncertainty remain key risks to the region’s outlook. These could further tighten energy markets, raise risk premia, and intensify inflationary and external pressures.

It further warned that tighter global financial conditions posed additional risks, with sovereign bond yields and borrowing costs rising and fiscal deficits projected to widen in several economies.

It said higher tariffs and elevated trade policy uncertainty could also weigh on economic activity, while rising fertiliser prices continued to threaten agricultural output and food security.

Growth projections for 2026 were lowered for most subregions, except developing East Asia. Forecasts for the People’s Republic of China remained unchanged at 4.6pc for 2026 and 4.5pc for 2027, supported by strong exports and infrastructure investment.

India’s growth forecast was revised down to 6.6pc this year as higher energy costs weigh on domestic demand, while the 2027 forecast was maintained at 7.3pc.

Growth projections for Southeast Asia and the Pacific were also trimmed, reflecting weaker domestic demand and tourism, rising inflation and higher import costs.