ISLAMABAD: Pakistan’s economy is projected to expand 3.8% in fiscal year 2027, up from the previous fiscal year, but the World Bank said the Middle East conflict, elevated commodity prices and adverse weather will restrain the recovery.
In its latest outlook, the World Bank said energy and commodity prices are expected to return to pre-conflict levels only in the second half of FY27, limiting growth across key sectors.
Headline inflation is forecast to rise to 8.2% in FY27 from 7.1% in FY26, driven by higher global commodity prices and domestic food-price pressures. The bank projects inflation will ease to 7% in FY28, rise to 7.5% in FY29 ahead of the general election, and stabilize near 7% in FY30.
Agriculture and industry
El Niño conditions and higher fertilizer prices during the Rabi season are expected to weigh on crop production. Livestock is projected to remain the main driver of agricultural growth, while crop output recovers gradually.
Industrial activity is expected to strengthen marginally, led by manufacturing and construction. Construction should benefit from lower property taxes introduced in the FY27 budget.
Services-sector growth is projected to remain broadly unchanged from FY26, as elevated inflation and a slow agricultural recovery constrain wholesale and retail trade.
Medium-term outlook
The World Bank expects growth to strengthen gradually to about 4.5% by FY31 as commodity prices normalize, inflation eases and agricultural input costs decline.
Pakistan’s current account deficit is expected to widen in FY27 as recovering domestic demand pushes imports to grow faster than exports. Strong workers’ remittances are expected to finance most of the trade deficit and keep the deficit below 1% of GDP.
Official financing and renewed access to international bond markets are expected to keep the financial account in surplus. The bank’s baseline assumes no major new structural reforms and more limited fiscal loosening ahead of the 2029 general election.
The report warned that risks remain high, citing a prolonged Middle East conflict, a strong El Niño, high public debt and debt-service costs, and limited fiscal buffers.
