ISLAMABAD: The Asian Development Bank (ADB) on Thursday cut its forecast for Pakistan’s economic growth to 3.7 per cent, citing higher energy costs and anticipated pressure on foreign remittances from overseas Pakistanis.
In its Asian Development Outlook (ADO), 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.
“Preliminary data shows Pakistan’s economy growing by 3.7pc in FY26, which ended June 30, supported by strong industry and services alongside modest agricultural gains. However, the growth forecast is revised down to 3.7pc for FY27 due to higher energy costs and pressure on remittances,” said the Asian Development Outlook July 2026.
The ADB had earlier projected a 4.5pc growth rate for the current fiscal year in its April 2026 forecast.
Lowers projection to 3.7pc for FY27 on higher energy costs
It also revised upward its inflation forecasts for both FY2026 and the current fiscal year compared with its April 2026 estimates.
“Pakistan’s inflation forecast is revised up to 7.2pc in FY26 on rising food and fuel costs. The forecast for FY27 is also revised up to 8.3pc, given persistent adverse spillover from the Middle East conflict.”
In April, the ADB estimated inflation at 6.4pc for FY26 and 7.2pc for FY27.
Meanwhile, the government has set the GDP growth target of 4pc and inflation at 8.2pc for the current year. The IMF anticipates 3.5pc growth for the current year.
Pakistan is not the only nation in the region to face higher inflation and lower growth this year, as the ADB 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.
“For 2027, most sub-regional growth projections are unchanged, reflecting expectations of a gradual recovery. Downward revisions are seen in the Caucasus and Central and West Asia as well as South Asia, driven by lower forecasts for Armenia, Bangladesh, Nepal, Pakistan, Sri Lanka, and Turkiye partly because of the continued impact of higher energy prices”, the ADB noted.
With price pressures intensifying in recent months, headline inflation ran above target in 10 of 17 inflation-targeting economies in March-May.
Inflation breached target ranges in Armenia, Georgia, Mongolia, Nepal, Pakistan, the Philippines, and Vietnam in early 2026 and remained above target, the ADB said.
In response, monetary policy decisions have shifted toward rate holds and selective rate hikes, with central banks calibrating the pace of tightening to contain inflation while limiting drag on growth.
In April-June, policy rates were raised in Indonesia, Pakistan, and Sri Lanka by 100 basis points; in the Philippines by 50bps; and in Georgia by 25bps. Some central banks used foreign exchange intervention or regulatory measures to stabilise currencies.
Bucking the trend, Kazakhstan’s central bank cut rates by 100bps in June as annual and monthly inflation eased, with lower price increases in food and services.
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 outlook.
Published in Dawn, July 10th, 2026