The World Bank has revised Pakistan economic growth forecast upward to 3 percent for the current fiscal year, compared to its earlier estimate of 2.6 percent. It also lowered the poverty rate to 22.5 percent from 25.3 percent last year, even without new household data. The update was shared in the Pakistan Development Update 2025 report released on Tuesday in Islamabad.
Earlier this month, the bank had predicted slower growth due to flood-related losses. However, it now expects smaller damages than previously estimated. “We don’t know the exact impact of losses,” said Bolormaa Amgaabazar, the World Bank country director in Islamabad. The lender’s revised projection reflects modest economic recovery supported by easing inflation and limited improvement in labor shifts to construction and transport sectors.
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Senior Economist Christina Wieser clarified that the poverty reduction estimates were based on simulations using sectoral GDP data, inflation, and income transfers — not the new Household Integrated Economic Survey. She added that growth remained fragile, warning that floods and rising population could still slow progress in poverty reduction. The report expects the poverty rate to decline modestly to 21.5 percent in FY26 and 20.6 percent in FY27.
The World Bank acknowledged Pakistan’s progress in macroeconomic stabilization but warned of major fiscal challenges ahead. It stressed that sustainable recovery requires balanced policies between spending and revenue collection, especially to manage flood impacts and avoid new debt accumulation. Export decline remains a major concern, with the share of exports dropping from 16 percent of GDP in the 1990s to 10 percent in 2024.
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Despite short-term optimism, the bank cautioned that Pakistan economic growth remains too weak to significantly improve living standards. It urged timely reconstruction, stronger social protection, and continued reforms to prevent long-term setbacks for vulnerable communities.