World Bank Cuts Pakistan’s Growth Forecast to 2.6% for 2025–26

Islamabad: The World Bank has revised Pakistan’s economic growth forecast downward to 2.6% for the fiscal year 2025–26. The updated projection, reduced from an earlier estimate of 3.1%, is due to the devastating impact of recent floods and the growing risk of inflation. The assessment was published in the World Bank’s latest economic report for the Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) region.

The report highlights that severe floods have disrupted Pakistan’s agricultural sector, especially in Punjab, where a 10% decline in crop production is expected. Major crops such as wheat, rice, cotton, sugarcane, and maize have been badly affected. As a result of the agricultural disruption, inflation—which had previously dropped below 10%—is now expected to rise again. The World Bank projects inflation to reach 7.2% in the current fiscal year due to food supply shortages.

Despite the current economic challenges, the World Bank expects Pakistan’s economy to recover slightly in 2026–27, forecasting a growth rate of 3.4%. This potential rebound will likely be supported by stronger agricultural output, lower interest rates, and improved business confidence. The report also points to Pakistan’s five-year tariff reform plan (2025–2030) as a positive step. By simplifying and reducing import duties, the plan aims to boost exports and encourage economic growth.

The report also discusses Pakistan’s ongoing struggle with poverty and inequality. Although poverty declined by 9.4 percentage points between 2011 and 2018, this progress has been reversed by recurring economic and climate-related shocks. Pakistan remains one of the poorest nations in the MENAAP region. Another major concern is the country’s low female labor force participation. Only one in five women in Pakistan is part of the workforce, which is among the lowest rates globally. Many women, even those who are educated, face social and cultural barriers to employment.

World Bank Vice President Usman Diwan emphasized the urgent need for bold reforms, especially to improve gender inclusion. He called on governments in the region to take decisive steps to remove barriers faced by women. Chief Economist Roberta Gatti added that boosting female employment could raise per capita GDP by 20 to 30 percent in countries like Pakistan, Egypt, and Jordan.

The broader MENAAP region is expected to grow by 2.8% in 2025 and 3.3% in 2026, though global economic uncertainty and regional conflicts could affect these projections. Oil-exporting countries are expected to stabilize as production returns to normal, while oil-importing countries such as Pakistan may benefit from growth in tourism, agriculture, and private investment.

In addition to economic concerns, Pakistan faces demographic challenges. With a high fertility rate of 3.5%, the population is growing rapidly. However, economic opportunities have not kept pace, especially for women and young people. The report concluded that while Pakistan has taken some positive steps such as labor and wage reforms, much more needs to be done to ensure long-term, inclusive, and resilient economic growth.

The World Bank emphasized that addressing gender inequality, building climate resilience, and continuing structural reforms will be critical if Pakistan hopes to unlock its full economic potential in the coming years.