ADB expects Pakistan growth at 3.7% in FY2027 as Middle East conflict weighs on economy

Business Recorder reported that the Asian Development Bank (ADB) expects Pakistan's growth to stay at 3.7% in FY2027, with the Middle East conflict still dragging on activity. The lender's September Asian Development Outlook also forecasts inflation climbing to 8.3%. It warns that costlier energy and logistics, along with pressure on the exchange rate, could make the recovery harder.

Private investment is projected to be the main driver of demand, following a real expansion of 8.6% in FY2026. The ADB credits sustained progress under the IMF's Extended Fund Facility, a return to international capital markets, and sovereign credit rating upgrades in July and August 2026 with stronger investor confidence and lower financing costs. Tariff cuts on industrial inputs and a smaller corporate tax burden after a super tax cut should also help the investment climate.

Household spending is likely to stay subdued as high global energy prices squeeze real incomes, while manufacturing faces slower momentum from higher production costs. The construction segment is set to benefit from budget measures, among them lower property transaction taxes and a larger subsidy on interest under the Prime Minister's housing scheme. ADB also expects the current account deficit to widen as imports grow, though gross reserves are projected to exceed $21 billion by end-June 2027.