ADB Forecasts Pakistan’s GDP to Grow by 2.5% in FY25

  • Growth outlook result of stable macroeconomic position due to IMF.
  • Lender observes stability due to reforms in tax, energy sectors.
  • FY25, growth expected to be driven by private sector investment.

ISLAMABAD: The Asian Development Bank (ADB) released its economic forecast for Asian countries on Wednesday, highlighting indications of stability and recovery in Pakistan’s economy. The ADB projects a gross domestic product (GDP) growth of 2.5% for Pakistan in fiscal year 2025, attributing this to ongoing reforms.

According to the Asian Development Outlook (ADO) for April 2025, the lender noted that Pakistan’s economy is demonstrating signs of stability and recovery. Growth in FY25—ending June 30, 2026—is expected as the impacts of stringent macroeconomic policies and advancements in economic reforms materialize.

The ADB indicated that this growth outlook is supported by a more stable macroeconomic environment, facilitated by the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) arrangement, which commenced in October 2024. GDP growth is anticipated to reach 3% in FY2026.

Furthermore, the bank emphasized that adhering to the economic adjustment program is crucial for enhancing resilience and fostering sustainable and inclusive growth.

“Pakistan’s economy has benefited from improved macroeconomic stability through robust reform implementation in areas such as tax policy and energy sector viability,” the ADB stated.

“Growth is projected to persist in 2025 and to increase in 2026. Sustained implementation of policy reforms is vital to buttress this growth trajectory and fortify fiscal and external buffers,” said ADB Country Director for Pakistan Emma Fan.

In FY25, growth is expected to be fueled by a resurgence in private sector investment, linked to advancements in reform measures, perceptions of greater economic stability, and a stable foreign exchange market.

The successful execution of the reform program is expected to continue fostering a more stable macroeconomic environment and gradually eliminate structural barriers to growth.

Economic activity in both the industrial and service sectors will benefit from recent monetary easing and macroeconomic stability. Additionally, strong remittance inflows, lower inflation, and monetary easing are likely to bolster aggregate demand.

Average inflation is projected to decline significantly to 6% in FY25 and further to 5.8% in FY26. This decline is attributed to continued moderation in food inflation, stable global oil and commodity prices, moderate domestic demand conditions, and a favourable base effect.

The ADB also noted that female labor force participation remains low in Pakistan compared to regional and peer countries. Enabling more women to work outside the home could boost productivity and output while advancing female empowerment.