ISLAMABAD: The Asian Development Bank (ADB) on Thursday revised down Pakistan’s economic growth forecast for fiscal year 2026-27 to 3.7% from 4.5%, citing the prolonged impact of the Middle East conflict on energy prices, supply chains and remittance flows.
In its Asian Development Outlook – July 2026, the Manila-based lender said the growth outlook for developing Asia and the Pacific had improved slightly this year but remained below earlier projections due to the economic fallout from the Middle East crisis.
“The Middle East conflict has led to prolonged disruption to energy and supply chains, raising production costs and dampening economic activity,” the ADB said in its updated report.
According to preliminary data, Pakistan’s economy expanded by 3.7% in fiscal year 2025-26, which ended on June 30, supported by strong performance in the industrial and services sectors, along with modest growth in agriculture.
However, the ADB lowered its growth forecast for FY2026-27 to 3.7% from its earlier estimate of 4.5%, citing higher energy costs and expected pressure on workers’ remittances stemming from regional tensions.
The bank also revised upward its inflation forecasts for Pakistan. It now expects inflation to average 7.2% in FY2025-26, reflecting higher food and fuel prices.
For FY2026-27, the inflation forecast was raised to 8.3% from 6.5%, as persistent spillover effects from the Middle East conflict are expected to keep inflationary pressures elevated.
The ADB warned that continued geopolitical tensions in the Middle East could weigh on the region’s economic outlook, with higher prices for energy, fertilisers and other commodities likely to sustain inflationary pressures across South Asia.
