Pakistan’s economy is projected to grow by 3.5% in 2026, driven by the continued implementation of the IMF reform programme and a steady economic recovery, according to the ‘World Economic Situation and Prospects 2026’ report released by the United Nations.
The report, published by the UN Department of Social Affairs (DESA), highlights that Pakistan’s economic fundamentals are improving. The current account posted a surplus for FY25, fiscal targets for the primary balance were exceeded, inflation remained under control, and external reserves strengthened.
However, the report warns that adverse shocks, such as the recent floods, could pose risks to ongoing economic and development progress, potentially undermining growth, fiscal consolidation, and poverty reduction efforts.
Pakistan’s economy has shown early signs of recovery, with a reported 3.71% growth in the first quarter of FY26, marking a sharp improvement over the 1.80% growth during the same period in FY25. This 2.15 percentage point year-on-year difference indicates a positive shift in the macroeconomic trajectory compared to last year’s gradual growth pattern.
Earlier, Planning Minister Ahsan Iqbal pointed to strong industrial performance as a key driver. Industrial output expanded by 9.38% in Q1 FY26, a significant increase from the 0.12% growth in Q1 FY25. This marks a broader base for the economy, signaling a “qualitative change” in growth composition.
Iqbal emphasised that despite challenges such as the 2025 floods, the withdrawal of energy subsidies, fiscal tightening measures, and ongoing food-price pressures, the economy showed resilience. He expressed confidence that the stronger performance in Q1 FY26 would provide a more stable foundation for recovery, though risks related to inflation, external financing needs, and industrial activity remain.
