ADB Revises Pakistan’s FY25 Growth Forecast to 2.7% Amid Modest Recovery
The Asian Development Bank (ADB) has updated its economic outlook for Pakistan in its July 2025 report, forecasting a gross domestic product (GDP) growth of 2.7% for the fiscal year 2025. The update reflects a slight improvement in Pakistan’s economic trajectory, though overall growth remains subdued.
Interest Rate Cut by SBP
One of the notable developments was the State Bank of Pakistan’s (SBP) decision to reduce the policy interest rate by 1.5% by the end of June 2025. This move was aimed at stimulating economic activity and managing inflation. However, ADB cautioned that despite this monetary easing, the economic recovery remains modest and a strong rebound is unlikely in 2026.
Trade Challenges & External Pressures
A key concern highlighted in the ADB report is the uncertainty surrounding trade. In particular, US tariffs on Pakistani exports continue to pose a threat to the country’s trade volumes. This could further constrain external earnings and widen the trade deficit, affecting overall economic momentum.
Inflation Shows Signs of Easing
On a positive note, inflation in Pakistan is showing a downward trend. Both food and non-food prices have gradually declined during the first eleven months of 2025. This offers some relief to households and may improve consumer confidence in the short term.
Cautious Optimism
The ADB’s tone remains cautiously optimistic. While there are visible signs of macroeconomic stability, including controlled inflation and a supportive interest rate environment, deeper structural reforms are necessary to unlock higher and more sustainable growth.
Regional Perspective
The report also notes that ADB has revised growth forecasts downward for several developing economies in Asia and the Pacific. Slower export demand, higher tariffs from the US, and weaker domestic consumption are the major contributing factors.
Conclusion
Pakistan’s economic journey in FY25 has been one of slow recovery and cautious progress. With inflation under control and monetary policy easing, some green shoots are visible. However, trade-related uncertainties and structural challenges continue to weigh on long-term growth prospects. The path forward will require policy consistency, strategic reforms, and resilience in the face of global economic headwinds.
