World Bank Cuts Pakistan’s GDP Forecast Amid Flood Impact

The World Bank has cut Pakistan’s GDP growth forecast for the ongoing fiscal year 2025–26 to 2.6%, down 0.5% from its previous estimate of 3.1% issued in June 2025. In its latest report titled “Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) Economic Update,” the World Bank said Pakistan’s growth outlook has been hit by ongoing catastrophic floods. It added that disruptions in food supply chains are also likely to push inflation upward in the coming months. According to early estimates cited in the report, agricultural output in Punjab, Pakistan’s largest crop-producing region, has fallen by at least 10%, affecting key crops such as rice, sugarcane, cotton, wheat, and maize. For fiscal year 2026–27, the Bank expects growth to accelerate to 3.4%, supported by a recovery in agriculture, lower inflation and interest rates, and improved business and consumer confidence. The report noted that Pakistan’s GDP is estimated to have grown 2.7% in FY2024–25, slightly above the 2.5% recorded in the previous year. The World Bank also highlighted that Pakistan’s new five-year tariff reform plan (2025–30), which aims to halve import tariffs, could enhance export competitiveness and long-term growth. In economies like Egypt, Jordan, and Pakistan, the report added, removing barriers that limit women’s participation in the workforce could boost GDP per capita by 20 to 30%, representing some of the largest potential economic gains globally. For the broader MENAAP region, the Bank projected GDP growth of 2.8% in 2025 and 3.3% in 2026, reflecting gradual stabilization across economies. The report noted that Pakistan’s inflation had fallen to single digits in FY2024–25, following a decline in food and energy prices. However, it warned that flood-related supply disruptions could drive inflationary pressures through 2027. The Bank also projected a potential decline in global exports for Pakistan (1.5%) and Tunisia (0.5%) due to weakened external demand and domestic challenges. While poverty levels in Pakistan dropped by 9.4% points between 2011 and 2018, the World Bank said the economic shocks and natural disasters since 2020 have likely stalled this progress. With its large population and relatively high poverty rate, Pakistan continues to account for a significant share of the region’s poor. The report further observed that Pakistan has one of the highest fertility rates in the region at 3.5%, though demographic trends indicate that the rate is expected to fall below replacement level within a generation, similar to regional peers but with a delayed transition.