Pakistan’s economic recovery is expected to remain subdued, with GDP growth projected at 2.6% in FY2025-26, as devastating floods, weakened agricultural output, and persistent inflation continue to weigh on the economy, according to the World Bank’s latest economic report on the Middle East, North Africa, Afghanistan & Pakistan (MENAAP) region, released Tuesday.
The report noted that real GDP grew by 2.7% in FY2024-25, marginally higher than the previous year’s 2.5%, but ongoing flood-related disruptions have dampened the outlook for FY26. “Catastrophic floods have damped the forecast,” the World Bank stated, adding that early assessments indicate a 10% decline in Punjab’s agricultural output, affecting major crops including rice, sugarcane, cotton, wheat, and maize.
Despite this setback, the World Bank expects a gradual recovery from FY2026-27 onward, projecting growth to accelerate to 3.4%. This rebound will likely be driven by improved agricultural productivity, easing inflation, lower interest rates, and stronger consumer and investor confidence.
The report highlighted that Pakistan’s historically high and complex tariff structure has constrained competitiveness. However, a newly approved five-year tariff reform plan (2025–2030)—which aims to halve existing tariffs—could help boost exports and industrial growth in the medium term.
Economists caution that the pace of recovery will depend on effective flood management, fiscal discipline, and structural reforms, particularly in energy pricing and taxation. Without sustained policy continuity, they warn, Pakistan risks falling short of its medium-term growth potential.
