ADB maintains Pakistan’s 3.7% growth forecast, warns of global risks

In its Asian Development Outlook (ADO) July 2026, the Manila-based lender said Pakistan’s economy is expected to continue its gradual recovery, although inflationary pressures are

The Asian Development Bank (ADB) has maintained Pakistan’s economic growth forecast at 3.7 percent for the 2026–27 fiscal year, while projecting inflation at 8.3 percent, slightly above the government’s estimate. The outlook reflects cautious optimism for Pakistan’s economy despite mounting global challenges linked to geopolitical tensions and energy market disruptions.

In its Asian Development Outlook (ADO) July 2026, the Manila-based lender said Pakistan’s economy is expected to continue its gradual recovery, although inflationary pressures are likely to remain elevated due to rising global energy and commodity prices.

The ADB also revised down its overall growth forecast for developing Asia and the Pacific to 4.9 percent for 2026, compared with 5.5 percent last year and 0.2 percentage points lower than its April projection. The bank, however, retained its regional growth estimate of 5.1 percent for 2027, expecting conditions to improve as global pressures ease.

According to the report, prolonged disruptions in international energy markets caused by the Middle East conflict have had a greater-than-expected impact on regional economies. Although a framework agreement reached in June is expected to gradually stabilize energy supplies, the bank warned that the pace of recovery remains uncertain.

The ADB noted that the effects of higher energy prices have extended beyond fuel markets, increasing the cost of fertilizers, commodities and global supply chains. These factors are expected to keep inflation elevated across the region.

Regional inflation is now projected at 4.3 percent in 2026, higher than the previous estimate and significantly above last year’s level. The inflation forecast for 2027 remains unchanged at 3.4 percent.

ADB Chief Economist Albert Park said sustained implementation of the recent framework agreement could help restore stability in global energy markets, but warned that uncertainty remains high. He added that policymakers across the region must carefully balance measures to support economic growth while containing inflation.

The report also highlighted several downside risks, including renewed geopolitical tensions, tighter global financial conditions and rising borrowing costs. Higher sovereign bond yields, widening fiscal deficits and uncertainty surrounding international trade policies could further weaken economic performance across developing economies.

In addition, the bank cautioned that increasing fertilizer prices may threaten agricultural production and food security in several countries.

Across the region, growth forecasts for most subregions were revised downward. China’s outlook remained unchanged at 4.6 percent for 2026 and 4.5 percent for 2027, supported by strong exports and infrastructure investment. India’s growth forecast was lowered to 6.6 percent for this year due to higher energy costs affecting domestic demand, while its 2027 projection remained at 7.3 percent.

The ADB also reduced growth forecasts for Southeast Asia and the Pacific, citing weaker domestic demand, slowing tourism, higher import costs and persistent inflationary pressures.