ADB Holds Pakistan's Growth Forecast at 3.7 Percent, Warns Energy Costs Could Cap the Pace

The Asian Development Bank kept its growth forecast for Pakistan unchanged at 3.7 percent for FY2027 in its September 2026 Asian Development Outlook, launched September 23, crediting two years of reform-driven stabilisation while warning that elevated energy prices could keep the economy from accelerating further.

What the ADB is projecting

The 3.7 percent FY2027 figure matches the bank's July 2026 outlook. It follows FY2026 growth, for the year that ended June 30, 2026, that itself accelerated to 3.7 percent from 3.2 percent in FY2025. According to the ADB report as carried by APP, that expansion was broad-based: resilient services, a rebound in manufacturing, a recovery in agriculture, which grew 2.9 percent despite flood-related crop losses, and private investment that rose 8.6 percent. The bank noted the Middle East conflict slowed activity in the fiscal year's final quarter. On prices, inflation averaged 7.1 percent in FY2026, up from 4.5 percent in FY2025, and the bank projects it will rise to 8.3 percent in FY2027, above the State Bank of Pakistan's 5-7 percent medium-term target range.

Why the ADB is more upbeat than a year ago

ADB Country Director for Pakistan Emma Fan said Pakistan's economy "has made progress in strengthening macroeconomic stability over the past two years, with stronger growth, improved external buffers, restored market confidence, and sovereign credit rating upgrades reflecting the benefits of sustained reforms." The report cites Eurobond and Panda bond issuances in April and May 2026 and sovereign rating upgrades from S&P in July and Moody's in August. Pakistan's foreign exchange position is covered in our reserves and remittances piece, and the country is in the fourth EFF review. The ADB expects renewed access to international capital markets to support investor confidence and private investment.

The catch: energy prices and a war next door

The bank's central caveat is that elevated energy prices and continued external uncertainty, including lingering effects of the Middle East conflict, are expected to constrain further acceleration in growth. It lists further risks: higher energy import costs, disruption to Gulf labour markets and remittances, austerity weighing on domestic demand, tighter global financing, tax revenue shortfalls, weather shocks to agriculture and delays in energy-sector and state-owned enterprise reforms. The same oil-market volatility has run through Pakistan's fuel-pricing system: after fighting between the US and Iran began in late February, Pakistan moved from fortnightly to weekly fuel-price reviews and in July announced daily pricing, Arab News reported.

A different investment figure

A day after the outlook was released, the Overseas Investors Chamber of Commerce and Industry told a visiting IMF delegation that net foreign direct investment fell about 32 percent to $1.7 billion in FY2026, a decline the chamber said came despite improvements in Pakistan's external position and credit profile. Our report on the OICCI meeting has the detail. The ADB's 8.6 percent figure measures private investment overall, while the OICCI figure measures net inflows of foreign capital.

What to watch

The ADB's own risk list sets out what could move the 3.7 percent figure: the course of the Middle East conflict and energy prices, remittances from the Gulf, tax collection, and the pace of energy-sector and state-owned enterprise reform.

Build Better Pakistan's Economy Desk tracks multilateral forecasts and macroeconomic data releases affecting Pakistan's growth outlook.