The Asian Development Bank (ADB) has lowered Pakistan's economic growth forecast for FY2027 to 3.7%, down from its April 2026 projection of 4.5%.
The lender cited higher energy costs and expected pressure on workers' remittances, signalling a slower recovery as regional instability continues to weigh on the economy.
In its Asian Development Outlook July 2026, the Manila-based lender said Pakistan's economy expanded by 3.7% in FY2026, which ended on 30 June. Growth was driven by the industrial and services sectors, alongside modest gains in agriculture.
The ADB also revised its inflation outlook. It now expects inflation to average 7.2% in FY2026, up from its April 2026 estimate of 6.4%. Inflation is forecast to rise to 8.3% in FY2027, compared with the earlier projection of 7.2%.
The bank attributed the revisions to higher food and fuel prices, as well as persistent spillover effects from the conflict in the Middle East.
The forecast is below Islamabad's 4% growth target for FY2027, but remains slightly above the International Monetary Fund's forecast of 3.5%.
The government has set an inflation target of 8.2% for the current fiscal year.
Pakistan's downgrade comes as the ADB also lowered its growth forecast for developing Asia and the Pacific to 4.9% in 2026, down from 5.5% in 2025.
It maintained its 2027 regional projection at 5.1%, saying prolonged disruption in global energy markets has increased costs for fuel, fertilisers and other commodities across the region.
"Durable implementation of the framework agreement would help normalise global energy markets, but the pace of adjustment is highly uncertain, with significant downside risks," ADB Chief Economist Albert Park said.
The ADB warned that renewed geopolitical tensions, tighter global financial conditions and higher trade barriers could further slow growth and add to inflationary pressures across developing economies, including Pakistan.
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