Pakistan's economy to miss 4% growth target, inflation to rise: ADB

The Asian Development Bank (ADB) has projected Pakistan's economic growth at 3.7% for the current fiscal year, below the government's 4% target, while warning that inflation is likely to rise to 8.3% due to higher global energy prices and continued tensions in the Middle East.

In its latest Asian Development Outlook, the ADB forecast Pakistan's economy to grow by 3.7% in FY2026-27, falling short of the federal government's growth target of 4%.

The report also projected Bangladesh's economy to expand by 3.7%, placing both countries at the same growth level.

Inflation expected to increase

The ADB warned that Pakistan's average inflation rate could increase from 7.2% to 8.3% during the current fiscal year.

According to the report, rising global energy prices and ongoing geopolitical tensions in the Middle East are expected to drive up the cost of fuel, electricity and essential commodities, adding pressure on consumer prices.

South Asia outlook

The ADB projected South Asia's overall economic growth at 6.0%, with India expected to remain the region's fastest-growing economy at 6.6%.

Other forecasts include:

• Bhutan: Second-fastest growing economy in South Asia
• Sri Lanka: 4.0%
• Nepal: 3.9%
• Pakistan: 3.7%
• Bangladesh: 3.7%
• Afghanistan: 2.3%
• Maldives: 1.0%

Asia's growth revised downward

The bank revised Asia's overall growth forecast for 2026 down to 4.9%, citing the impact of geopolitical tensions, rising debt, higher financing costs and trade uncertainty.

It warned that increasing energy and fertiliser prices could threaten agricultural production, food security and economic stability across the region.

Risks remain

The ADB said governments across Asia should strike a balance between controlling inflation and sustaining economic growth, while noting that regional economic activity is expected to improve in 2027 if global conditions stabilise.