Pakistan growth forecast at 3.8% for FY27, says World Bank

The World Bank has set its Pakistan growth forecast at 3.8% for the fiscal year 2026-27, a small step up from the estimated 3.7% in the year just ended.

The lender also expects average inflation of 8.2% and a fiscal deficit of 3.5% of GDP. Both numbers come from its latest country note and its Pakistan Development Update.

What holds back the Pakistan growth forecast

In the bank’s view, the Middle East conflict keeps energy and commodity prices high. That limits growth in FY27, and higher fuel costs also feed inflation, which shapes the Pakistan growth forecast.

Weather adds to the pressure. Poor El Nino weather and pricey fertilisers could cut crop output. That would slow the wider recovery.

Under its central scenario, prices ease to preconflict levels late in FY27 only. The bank warned about one gap. Its numbers leave out a harsher El Nino, with drought or other extreme weather. That could hit farm output harder.

Within farming, livestock remains the biggest driver. Crops recover only gradually. Meanwhile, industry should pick up slightly with help from manufacturing and construction.

Inflation and the medium term

Prices should climb faster. Inflation averages 8.2% in the year, up from 7.1%. The bank points to global commodity costs and home-grown food pressures, such as wheat and perishable goods.

Costlier energy should lift transport costs and core inflation in the first half. After that, base effects, moderate demand under fiscal consolidation and better wheat supply should ease the pace of price rises.

The bank sees inflation falling to 7% in FY28, then rising to 7.5% in FY29 before the general election due in 2029. It expects it to settle near 7% in FY30.

The monthly figure already runs higher. One analysis of the note points out that September inflation hit 10.3%. An 8.2% average therefore needs prices to cool later. The State Bank moved its policy rate up to 11.5% in April.

Growth should strengthen gradually. Looking further out, it sees 4.2% in FY28 and around 4.5% by FY31, as commodity prices normalise, inflation eases and farm input costs decline.

How it compares

The IMF’s April forecast for FY27 was 3.5% growth and 8.4% inflation, so the bank is slightly more hopeful on growth and a little less worried about prices. That growth measure uses factor cost, the same basis as the national statistics office.

A regional report from the bank also covers poverty. About 48% of people in the Middle East, North Africa, Afghanistan and Pakistan region who live below $3 a day, or about Rs840, are in Pakistan.

It ties the rise in poverty to a string of shocks, among them the pandemic, the 2022 floods and high inflation with a weaker currency. A long period of adjustment also cut real incomes and jobs.

Afghanistan, Syria and Yemen hold another 47% of the region’s poor, the report adds.

For now, the Pakistan growth forecast points to a slow recovery, and the outlook hinges on energy prices and the weather.