UN forecasts 3.5% economic growth for Pak in 2026

Islamabad: Pakistan’s economy is projected to grow by 3.5% in 2026, supported by the continued implementation of the International Monetary Fund (IMF) reform programme and a gradual economic recovery, according to the World Economic Situation and Prospects 2026 report released by the United Nations.

The report, published by the UN Department of Economic and Social Affairs (DESA), noted that Pakistan’s economic fundamentals have improved over the past year. It highlighted a current account surplus in FY25, stronger external reserves, controlled inflation, and better-than-target performance on the primary fiscal balance as key indicators of stabilisation.

Despite the improving outlook, the UN cautioned that adverse shocks, including recent floods, could pose risks to growth and development momentum. Such events may undermine fiscal consolidation efforts, disrupt economic activity, and slow progress on poverty reduction.

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The report also pointed to early signs of recovery in the current fiscal year. Pakistan’s economy grew by 3.71% in the first quarter of FY26, a marked improvement from 1.80% growth recorded in the same period of FY25, reflecting a positive shift in the country’s macroeconomic trajectory.

Earlier, Planning Minister Ahsan Iqbal attributed the stronger performance to improved industrial activity. Industrial output expanded by 9.38% in Q1 FY26, compared to just 0.12% growth in Q1 FY25, indicating a broader and more resilient base for economic growth.

While acknowledging challenges such as flood-related disruptions, fiscal tightening, the withdrawal of energy subsidies, and persistent food-price pressures, the minister said the economy has shown resilience. He added that the stronger start to FY26 could provide a firmer foundation for recovery, though risks related to inflation, external financing needs, and industrial activity remain.