ISLAMABAD: Pakistan’s economy grew by 3.71 per cent in the first quarter (July-September) of the current fiscal year, a sizable increase from 1.56pc recorded in the same period last year.

However, the economy slowed down when compared with the 6.17pc expansion in the previous quarter (April-June), apparently due to weak consumer demand and the impact of monsoon floods weighing on overall economic activity, according to data released by the National Accounts Committee (NAC) on Tuesday.

The year-on-year quarterly growth was mainly driven by a 9.38pc increase in the industrial sector, followed by 2.89pc growth in the agriculture sector and 2.35pc in the services sector. The combined performance of these three key sectors contributed significantly to the overall economic expansion during the quarter.

The NAC slightly revised the GDP growth to 1.56pc in Q1, 2.03pc in Q2, 2.66pc in Q3, and 6.17pc in Q4 in 2024-25.

Growth slows from 6.1pc in preceding quarter due to floods

The State Bank of Pakistan (SBP) expects GDP to grow at 4pc for FY26. The World Bank projection is slightly below the SBP at 3pc by the end of June 2026. However, the government has projected an expansion of 4.2pc in FY26, a target seems ambitious.

The 115th meeting of the NAC, chaired by the Planning Commission Secretary, took place on Tuesday at the Pakistan Bureau of Statistics headquarters. The meeting approved the updated annual growth rates for FY25.

Further analysis showed that the agriculture sector grew by 2.89pc in Q1 compared to the same period last year. However, within the sector, important crops recorded a negative growth of 0.75pc, primarily due to a 1.2pc decline in cotton production.

The important crops include wheat, cotton, rice, maize, and sugarcane, wheat had no impact on Q1 performance as it is neither sown nor harvested during this quarter. Other crops recorded a negative growth of 6.37pc, a sharp drop compared to 19.33pc in Q1 last year.

This decline was largely due to a 14.4pc reduction in green fodder production and a 13pc increase in input costs, particularly fertilisers. In contrast, the livestock sector grew by 6.29pc, up from 1.97pc in Q1 last year, attributed to the reduced cost of green fodder. Forestry and fishing sectors maintained their steady trends, registering growth rates of 2.13pc and 0.91pc, respectively.

The industrial sector recorded a robust growth of 9.38pc in Q1 of FY26, a significant jump from just 0.12pc in the same period last year. However, a deeper look reveals mixed trends within sub-sectors. Mining and quarrying declined by 4.13pc, driven by lower output in natural gas (-7.1pc), crude oil (-4.9pc), limestone (-6.8pc), and other minerals (-4.2pc).

Large-Scale Manufacturing (LSM) showed a positive growth of 3.93pc. Key drivers included food (6.30pc), automobiles (84.60pc), transport equipment (40.73pc), non-metallic mineral products (13.86pc), and rubber products (14.10pc). Conversely, machinery and equipment recorded a decline of 14.08pc.

The construction industry also showed improvement, based on indicators like cement production, which rose by 15.32pc in Q1 2025-26 compared to the same period last year, alongside increases in other construction-related activities.

Services industry has shown a growth of 2.35pc in Q1FY26 as compared to 2.24pc in Q1 last year. Detailed analysis of the industry reflects a mixed trend.

Published in Dawn, December 31st, 2025