IMF Revises Pakistan’s GDP Growth Forecast Downward for FY25

The International Monetary Fund (IMF) has adjusted its GDP growth forecast for Pakistan downward by 0.4%, now projecting a 2.6% growth rate for the fiscal year 2025, compared to its earlier 3% projection in January 2025.

According to the Fund’s recent “World Economic Outlook (WEO),” which highlights a crucial period amid policy adjustments, Pakistan’s GDP is anticipated to grow at 2.6% in 2025 and 3.6% in 2026.

In its January 2025 WEO, the IMF had initially estimated Pakistan’s GDP growth rate at 3% for the fiscal year 2025 and 4% for 2026.

Previous Performance: Pakistan’s GDP experienced growth of 0.92% in July-Sept and 2.5% in FY24.

The IMF has also revised its inflation rate projection downward to 5.1% for the current fiscal year and 7.7% for the fiscal year 2026, a significant drop from the 23.4% recorded in the fiscal year 2024.

Unemployment in Pakistan is expected to decline to 8% in 2025, a decrease from 8.3% in 2024, with a further projected decrease to 7.5% in 2026.

The current account balance is projected to be negative 0.1% for 2025, an improvement from negative 0.5% in 2024, with a projected negative 0.4% for 2026.

The Fund anticipates general government net lending/borrowing to be negative 5.6% of GDP for 2025, compared to negative 6.8% of GDP for 2024.

The Asian Development Bank (ADB) has also adjusted Pakistan’s GDP growth forecast for the fiscal year 2025 downward to 2.5% (from 3% in December 2024), noting that the country’s economic future largely hinges on the success of ongoing economic reforms. The ADB also clarified that its growth forecasts were finalized before the U.S. administration’s April 2 announcement of new tariffs, thus the baseline projections only account for tariffs already in effect.

The World Bank postponed the release of its Pakistan Development Outlook, initially scheduled for April 9, to reassess projections following the U.S. tariff announcement.

The IMF report indicates that the global economy, after facing a series of significant shocks, appears to have stabilized with modest growth rates. However, the global landscape is shifting as governments worldwide realign policy priorities and uncertainties reach new levels.

Global growth forecasts have been significantly revised downward compared to the January 2025 WEO Update, reflecting substantial effective tariff rates and a highly volatile environment. Global headline inflation is expected to decrease at a slightly slower pace than previously anticipated.

The report also cautions that intensifying downside risks dominate the outlook, particularly due to escalating trade tensions and financial market adjustments. Divergent policy positions or declining sentiment could further tighten global financial conditions.

An escalating trade war and increased trade policy uncertainty could impede both short-term and long-term growth prospects. Reduced international cooperation might also undermine progress toward a more resilient global economy.