Pakistan’s economy is facing significant hurdles, as highlighted by the International Monetary Fund’s (IMF) recent revisions to its growth forecasts. The international financial institution downgraded Pakistan’s GDP growth projection for 2025 to 3%, reflecting ongoing economic challenges. These forecasts align with the Asian Development Bank’s (ADB) earlier projections and emphasize the need for urgent structural reforms to address poverty, unemployment, and sluggish economic performance.

While modest growth is expected in the medium term, the global economic landscape also presents a mixed picture, with diverging growth trajectories and inflationary pressures shaping the outlook for major economies. The International Monetary Fund (IMF) has adjusted its economic forecast for Pakistan, lowering the country’s projected GDP growth for 2025 to 3% from the 3.2% it had predicted just three months earlier. This revision comes as part of the IMF’s broader global economic analysis, titled “World Economic Outlook Update: Global Growth – Divergent and Uncertain.” While the IMF expects Pakistan’s GDP growth to rebound to 4% in 2026, the downgrade highlights ongoing economic difficulties, though no specific reasons for the revision were provided.

This update aligns with the Asian Development Bank’s (ADB) recent forecast, which also adjusted Pakistan’s growth projection for the fiscal year 2024-25 to 3%, an increase from its earlier estimate of 2.8%. Both institutions acknowledge the challenges facing Pakistan’s economy but maintain cautious optimism for medium-term improvement.

In the first quarter of the current fiscal year, Pakistan’s GDP growth stood at a modest 0.92%, reflecting economic stagnation following stabilization measures under the IMF program. This sub-1% growth is significantly lower than the country’s annual population growth rate of 2.55%, as reported in the recent census. This disparity underscores the economy’s inability to reduce poverty or address rising unemployment. According to revised national accounts for fiscal year 2023-24, Pakistan’s economic size has reached Rs105.6 trillion ($373.3 billion), with per capita income calculated at Rs472,263 (around $1,669). These figures, however, are subject to revisions based on updated population data from the 2023 census.

As part of the IMF’s $7 billion loan program requirements, the government has released quarterly GDP data for the first quarter of fiscal year 2024-25. The data reveals that while agriculture and services sectors showed slight growth, industrial performance continued to decline. The GDP growth rate for FY2023-24 was revised marginally downward from 2.52% to 2.5%. Analysts have noted that while the IMF program has brought some economic stability, it has also curbed momentum, leaving the economy in a state of inertia.

The Pakistan Bureau of Statistics (PBS) confirmed these figures in a statement issued after the National Accounts Committee (NAC) approved Q1 growth data for FY2024-25 and the revised estimates for FY2023-24. A closer look at sectoral performance during Q1 FY2024-25 shows agriculture grew by 1.15%, the industrial sector contracted by 1.03%, and the services sector expanded by 1.43%. Crop production, however, fell sharply, declining by 5.93%. Significant crops, in particular, experienced an 11.19% drop due to decreased yields of cotton (-29.6%), maize (-15.6%), rice (-1.2%), and sugarcane (-2.2%). Wheat production remained unaffected during this period, as sowing and harvesting did not occur in this quarter.

These figures highlight the pressing need for structural reforms and policy adjustments to revive Pakistan’s economy and address its complex challenges. The detailed breakdown of Pakistan’s performance in the first quarter of FY2024-25 provides a mixed picture, with minor progress in some sectors overshadowed by persistent difficulties.

On the global stage, the IMF projects a 3.3% growth rate for both 2025 and 2026, slightly below the historical average of 3.7%. Pierre-Olivier Gourinchas, the IMF’s chief economist, emphasized that the global economy is navigating diverging growth trends. Stronger-than-expected growth in the United States is counterbalancing weaker outcomes in other major economies.

Inflation worldwide is expected to ease, with the IMF forecasting a decline to 4.2% in 2025 and 3.5% in 2026. However, certain regions are still grappling with stubbornly high inflation, despite the broader trend of disinflation. Energy commodity prices are expected to drop by 2.6% in 2025, while non-fuel commodity prices are predicted to rise by 2.5% due to adverse weather conditions impacting key producers.

The IMF’s outlook also includes mixed projections for major economies. For the United States, GDP growth is projected to reach 2.7% in 2025, revised upward by 0.5 percentage points, driven by strong domestic demand. However, growth is expected to slow to 2.1% in 2026.

For the Euro Area, economic growth is forecast at 1% for 2025, down from the previous estimate of 1.2%. This reflects weaker momentum, particularly in manufacturing, alongside political and policy uncertainties. Recovery is expected in 2026, with growth rising to 1.4%. Moderate growth of 1.6% is anticipated in 2025 for the UK, tapering slightly to 1.5% in 2026. For China, the IMF projects GDP growth of 4.6% in 2025 and 4.5% in 2026, while urging the country to bolster domestic demand to sustain economic expansion. Consistent robust growth is forecast for India, with the economy expected to grow by 6.5% in both 2025 and 2026, aligning with its potential.

The IMF’s analysis underscores the uncertain and uneven nature of the global economic landscape. Divergent growth trajectories across regions reflect a mix of domestic policy challenges, external shocks, and structural adjustments. The latest data underscores the critical need for Pakistan to implement structural interventions and recalibrate its policies to overcome its economic stagnation and foster sustainable growth. As global growth patterns remain uneven, with notable regional variations, Pakistan must adapt to these challenges while leveraging opportunities to stabilize and strengthen its economy.

The IMF’s cautiously optimistic medium-term outlook offers hope but hinges on proactive measures to address multidimensional challenges. Globally, while some economies like the United States and India show resilience, others face slower momentum, underscoring the uncertainty that continues to define the global economic environment.