Pakistan economic growth forecast 2025-26 predicts a 4.2% expansion, indicating a stronger recovery compared to this year’s slower growth. The Ministry of Planning and Development warns that easing import controls and ongoing debt repayments will pressure the external sector and widen the current account deficit.
The Annual Plan Coordination Committee (APCC) expects Pakistan’s GDP to expand by 4.2% in 2025-26, up from the estimated 2.7% growth this year. This forecast reflects a broad recovery across various sectors, though the government remains cautious about external risks. As Pakistan relaxes import restrictions and continues repaying debt, the ministry anticipates pressure on the external sector. However, strong remittances and export recovery should help cushion these effects, supported by expected external financing.
The ministry projects commodity-producing sectors will grow by 4.4%, driven mainly by agriculture and large-scale manufacturing (LSM). Agriculture should expand by 4.5%, benefiting from a rebound in major crops (6.7%) and cotton ginning (7%). Livestock will continue to perform strongly. The ministry expects LSM to grow by 3.5%, recovering from last year’s contraction.
Economic Growth Forecast and External Sector Risks
The Annual Plan Coordination Committee (APCC) expects Pakistan’s gross domestic product (GDP) to expand by 4.2% in 2025-26, up from the estimated 2.7% growth in the ongoing fiscal year. This projection reflects a broad-based recovery across various sectors, yet the government remains cautious about external vulnerabilities. Easing import restrictions and scheduled debt repayments may strain the external sector. The ministry highlights the risk of a widened current account deficit resulting from these factors. Despite this, strong remittance inflows and a rebound in exports are likely to provide a cushion, supported further by expected external financing.
Commodity-Producing Sectors to Lead Growth
The Ministry anticipates commodity-producing sectors will grow by 4.4%, with agriculture and large-scale manufacturing (LSM) playing key roles.
- Agriculture: The agriculture sector should grow by 4.5%, boosted by a recovery in major crop production (6.7%) and cotton ginning (7%). Livestock is also set to perform strongly, continuing its upward trend.
- Large-Scale Manufacturing (LSM): The ministry projects a 3.5% growth in LSM, signaling a turnaround from the contraction seen in the current year.
In the current fiscal year, both agriculture and LSM sectors underperformed their targets. Agriculture grew by only 2.3% against a 3.1% goal, while LSM shrank by 1.5%, far short of the 3.5% target. Crops contracted sharply by 13.5% compared to an anticipated 4.5% decline, and cotton ginning fell by 19% instead of the forecasted 2.3% decrease. Livestock bucked the trend with a 4.7% growth, exceeding its 3.8% target.
Industrial and Services Sectors Show Promising Signs
The industrial sector is poised for a revival, supported by projected growth in mining and quarrying (3%), construction, and energy, gas, and water supply. The services sector, which forms the largest portion of Pakistan’s GDP, is expected to grow by 4%, driven by wholesale and retail trade, transport, storage, and communications, financial services, and real estate. The ministry notes that these growth forecasts depend on sound macroeconomic management and a stable external environment.
Investment and Savings Outlook
National savings are expected to hold steady at 14.3% of GDP in 2025-26. Total investment should rise to 14.7% of GDP from 13.8% this year, narrowing the gap between savings and investments. This improvement will rely partly on modest external inflows. Public investment is forecast to increase from 2.9% to 3.2% of GDP, while private investment should climb from 9.1% to 9.8%. These positive trends suggest growing confidence in Pakistan’s economic prospects.
Inflation and Policy Expectations
The ministry forecasts inflation to settle around 7.5% during 2025-26. This rate factors in a low base effect from the previous year and risks related to ongoing trade tensions and domestic tariff adjustments. Fiscal and monetary policies will focus on consolidation and stability to maintain economic balance. The government aims to manage inflation pressures carefully while supporting growth and investment.
Conclusion: Balanced Optimism Amid Challenges
Pakistan’s economic outlook for 2025-26 reflects cautious optimism. Growth is set to strengthen across agriculture, manufacturing, industry, and services. However, external sector challenges from easing import controls and debt obligations pose risks to the current account. Strong remittances, export growth, and external financing are expected to alleviate these pressures. Meanwhile, increased savings and investment indicate improving economic fundamentals. Effective macroeconomic management will be crucial to sustain this growth momentum and achieve stability. The government’s focus on sound fiscal policies, along with efforts to boost industrial and agricultural output, aims to steer Pakistan toward a more resilient economic future.
