ISLAMABAD: Pakistan’s economy is expected to grow by 2.7% in the fiscal year ending June 2025, up from 2.5% in the previous year, as it continues to stabilize. The World Bank’s latest Pakistan Development Update indicates that real GDP growth will be supported by recovering private consumption and investment, aided by lower inflation, interest rates, and improving business confidence.
The economy is stabilizing, driven by easing inflation, better financial conditions, and surpluses in the current account and primary fiscal balance. However, growth has remained weak in the first half of the fiscal year, with agriculture seeing limited progress due to adverse weather and pest infestations. Industrial activity declined due to higher input costs, taxes, and reduced government spending. The services sector’s growth was also constrained by the sluggish performance of agriculture and industry.
Despite the forecast for a modest recovery, the World Bank cautions that achieving significant job creation and poverty reduction remains difficult due to high population growth. Najy Benhassine, World Bank Country Director for Pakistan, emphasized the importance of implementing structural reforms, including an efficient tax system, a market-determined exchange rate, and reduced import tariffs to boost exports.
The report projects GDP growth to strengthen to 3.1% in FY26 and 3.4% in FY27, contingent on macroeconomic stabilization and key reforms. However, risks remain, with elevated debt levels, global trade uncertainties, and vulnerability to climate-related shocks posing ongoing challenges.
The report also highlights the need for digital infrastructure reforms to boost Pakistan’s digital economy. It stresses the importance of improving connectivity, reducing broadband costs, and expanding digital services. Shahbaz Khan, co-author of the report, pointed out that legal and regulatory reforms are essential to closing the digital divide and fostering private investment in digital infrastructure.
The World Bank’s South Asia Development Update, published alongside the Pakistan report, forecasts regional growth to slow to 5.8% in 2025, with heightened risks from both global and domestic challenges.
