The Asian Development Bank (ADB) has revised Pakistan’s economic growth forecasts upward for both 2025 and 2026, noting that key food prices have begun to stabilise after a sharp post-flood spike and that recent economic performance has exceeded earlier expectations.
In its latest Asian Development Outlook: “Growth steadies but uncertainty lingers,” ADB said South Asia’s growth outlook for 2026 has been upgraded for Pakistan and Sri Lanka due to increased public investment and a less severe impact of flooding than previously anticipated.
Pakistan’s fiscal year 2025 outlook has been revised upward following stronger-than-expected economic activity in the fourth quarter. The government has updated its GDP estimate for FY2025 to 3%, up from an earlier 2.7%. Despite flood-related disruptions in June 2025, the economy grew 5.7% in Q4, while large-scale manufacturing has shown strong momentum entering FY2026.
ADB noted that inflation in Pakistan has eased significantly, falling to 4.7% during the first four months of FY2026, compared to 8.7% in the same period last year. The Bank attributed this improvement partly to the stabilisation of food prices after the flood-induced surge.
At the regional level, ADB has raised its growth forecasts for developing Asia and the Pacific for this year and the next, supported by stronger exports, easing trade uncertainty following new US trade agreements, moderating inflation, and stable financial conditions. Growth in the region is now projected at 5.1% in 2025, compared with 4.8% forecast in September, while the 2026 projection has been lifted to 4.6%.
“Asia and the Pacific’s solid economic fundamentals are underpinning robust export performance and steady growth, despite a global trade environment clouded by historic levels of uncertainty,” ADB Chief Economist Albert Park said. He added that while trade agreements have reduced some uncertainty, external risks, including renewed trade tensions, financial market volatility and China’s weakening property sector, may still weigh on the outlook.
Inflation across developing Asia is expected to ease further to 1.6% this year, helped by lower-than-expected food inflation in India, while next year’s inflation forecast remains unchanged at 2.1%.
The ADB reiterated warnings about Pakistan’s long-term exposure to economic water scarcity, noting that structural risks persist even as short-term growth indicators improve.
