By Staff Reporter
ISLAMABAD: The Asian Development Bank (ADB) has raised its GDP growth forecast for Pakistan in fiscal year 2025 to 2.7%, citing a stronger-than-anticipated performance in the industrial and services sectors, even as it lowered economic projections for developing Asia and the Pacific due to higher US tariffs and global trade uncertainty.
In its Asian Development Outlook (ADO) report released on Wednesday, the ADB said Pakistan’s economy provisionally grew 2.7% in FY2025, which ended June 30, 2025, prompting the slight upward revision. “Pakistan provisionally grew 2.7% in FY2025, resulting in the slight upward revision for FY2025, while the growth forecast for FY2026 is unchanged,” the report stated. “The revised growth forecast in Pakistan accounted for the higher-than-expected uptick in the industry and services sector, even as the expected declines in agricultural output come to pass.”
The brighter outlook for Pakistan contrasts with a gloomier picture for the broader region. The ADB cut its 2025 growth forecast for developing Asia and the Pacific to 4.7% from 4.9% projected in April, with the 2026 estimate trimmed to 4.6% from 4.7%. The downward revisions stem from reduced exports amid escalating US tariffs, weaker domestic demand, and mounting global risks.
Pakistan also saw a reprieve on the inflation front. “In Pakistan, the accelerated decline in food and nonfood prices for the first 11 months of FY2025 revised the inflation forecast for FY2025 downward, while the outlook for FY2026 remains unchanged,” the ADB report noted. This easing of price pressures offers some relief to policymakers in Islamabad as they navigate a complex economic landscape.
The ADB warned that the economic prospects for developing Asia and the Pacific, a group of 46 economies spanning China to Samoa but excluding Japan, Australia, and New Zealand, face significant headwinds. “Asia and the Pacific have weathered an increasingly challenging external environment this year. But the economic outlook has weakened amid intensifying risks and global uncertainty,” said ADB Chief Economist Albert Park.
Among the risks highlighted in the report are an escalation of US tariffs and trade tensions, geopolitical conflicts that could disrupt supply chains and lift energy prices, and a deeper-than-expected slump in China’s property market. These factors threaten to further erode growth across the region.
The forecasts follow recent moves by US President Donald Trump, who has imposed tariffs on nearly every trading partner, upending global trade flows. Earlier this month, Trump announced a 15% tariff on Japanese exports, lower than a threatened 25% rate, after striking a deal with Tokyo. He also set a 19% tariff on goods from the Philippines, down from a flagged 20% but above an earlier 17% rate from April. Since April, almost all countries have faced a baseline 10% US tariff, with many hit by steeper levies starting in August.
These policies have reverberated across Asia. For South Asia, the ADB trimmed its 2025 growth outlook to 5.9% from 6.0%, attributing the slight decline to the impact of US tariff policies on India and Sri Lanka. Southeast Asia faces the steepest slowdown, with growth now projected at 4.2% in 2025 and 4.3% in 2026, down from 4.7% for both years in the April forecast.
Park urged regional economies to bolster their defences. “Economies in the region should continue strengthening their fundamentals and promoting open trade and regional integration to support investment, employment, and growth,” he said. The ADB emphasized that domestic demand is likely to weaken further as geopolitical tensions, supply chain disruptions, rising energy costs, and uncertainty in China’s property sector buffet the region.
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