GDP growth at 2.7%: Pakistan's economy is losing momentum. What's going wrong
Pakistan's inflation is expected to remain around 10% through March 2027
- Oct 6, 2026,
- Updated Oct 6, 2026 6:43 PM IST
Pakistan's economic recovery is showing signs of losing momentum, with September data pointing to weaker demand and a slower pace of expansion, Bloomberg reported on Tuesday.
Manufacturing PMI fell to 50.9 in September from 51.8 in August, as new orders declined, the report said. Inflation-adjusted tax collections and petroleum-product sales also fell from a year earlier.
The slowdown comes after Pakistan had shown signs of stabilisation earlier this year.
The International Monetary Fund (IMF) in May this year said the country's economic recovery had strengthened, with GDP growth accelerating in the first half of fiscal 2026 and reserve rebuilding exceeding earlier projections.
But Bloomberg now expects growth to slow in the fiscal year, which runs from July 1 to June 30.
Pakistan's GDP growth is now forecast at 2.7% in fiscal 2027, down from an estimated 3.4% in fiscal 2026.
The outlook is being clouded by persistent inflation, high borrowing costs, and rising input and energy prices.
Inflation is expected to remain around 10% through March 2027, according to Bloomberg. That could further squeeze household purchasing power.
High interest rates are also expected to restrain credit and investment demand. Bloomberg sees another 50-basis-point rate increase by December.
At the same time, weaker demand and higher production costs could weigh on industrial activity.
The latest outlook marks a more cautious assessment than the one offered by the IMF in May.
"Strong policy implementation has continued to support Pakistan's economic recovery, build confidence, and bolster its resilience to shocks,” the IMF had said.
The Fund, however, had also warned that the West Asia war could push up inflation and weigh on growth and the balance of payments. It said "downside risks are high".
The Asian Development Bank had similarly said in April this year that Pakistan's economy had "stabilised and begun to show stronger momentum", while warning that downside risks remained significant.
ADB Country Director for Pakistan Emma Fan said sustained reforms would be needed to preserve growth momentum and strengthen the country's fiscal and external buffers.
"Growth is expected to continue in 2026 and 2027, but downside risks are significant. Sustained reform efforts are critical to preserve the growth momentum and bolster fiscal and external buffers against global shocks," Fan had said.
The ADB had projected average inflation at 6.4% in fiscal 2026 and 6.5% in fiscal 2027, citing higher oil prices and disrupted trade routes amid the Middle East conflict.
Pakistan's economic recovery is showing signs of losing momentum, with September data pointing to weaker demand and a slower pace of expansion, Bloomberg reported on Tuesday.
Manufacturing PMI fell to 50.9 in September from 51.8 in August, as new orders declined, the report said. Inflation-adjusted tax collections and petroleum-product sales also fell from a year earlier.
The slowdown comes after Pakistan had shown signs of stabilisation earlier this year.
The International Monetary Fund (IMF) in May this year said the country's economic recovery had strengthened, with GDP growth accelerating in the first half of fiscal 2026 and reserve rebuilding exceeding earlier projections.
But Bloomberg now expects growth to slow in the fiscal year, which runs from July 1 to June 30.
Pakistan's GDP growth is now forecast at 2.7% in fiscal 2027, down from an estimated 3.4% in fiscal 2026.
The outlook is being clouded by persistent inflation, high borrowing costs, and rising input and energy prices.
Inflation is expected to remain around 10% through March 2027, according to Bloomberg. That could further squeeze household purchasing power.
High interest rates are also expected to restrain credit and investment demand. Bloomberg sees another 50-basis-point rate increase by December.
At the same time, weaker demand and higher production costs could weigh on industrial activity.
The latest outlook marks a more cautious assessment than the one offered by the IMF in May.
"Strong policy implementation has continued to support Pakistan's economic recovery, build confidence, and bolster its resilience to shocks,” the IMF had said.
The Fund, however, had also warned that the West Asia war could push up inflation and weigh on growth and the balance of payments. It said "downside risks are high".
The Asian Development Bank had similarly said in April this year that Pakistan's economy had "stabilised and begun to show stronger momentum", while warning that downside risks remained significant.
ADB Country Director for Pakistan Emma Fan said sustained reforms would be needed to preserve growth momentum and strengthen the country's fiscal and external buffers.
"Growth is expected to continue in 2026 and 2027, but downside risks are significant. Sustained reform efforts are critical to preserve the growth momentum and bolster fiscal and external buffers against global shocks," Fan had said.
The ADB had projected average inflation at 6.4% in fiscal 2026 and 6.5% in fiscal 2027, citing higher oil prices and disrupted trade routes amid the Middle East conflict.