The Asian Development Bank (ADB) has revised its economic growth forecast for Pakistan in the fiscal year 2025 (FY25), reflecting a more optimistic outlook. Previously projected at 2.8% in September’s Asian Development Outlook (ADO), the growth forecast has now been adjusted to 3%. This revision highlights progress in Pakistan’s macroeconomic stability and its broader regional context while addressing risks and challenges.

The Asian Development Bank (ADB) has marginally upgraded its forecast for Pakistan’s economic growth in the fiscal year 2025, to 3%. In its September report, the Manila-based lender had estimated Pakistan’s growth at 2.8% for FY25, subject to various domestic and external challenges. The latest ADO update, however, has adjusted this figure upward to 3%. The report attributed the improved outlook to “greater macroeconomic stability” following the approval of a $7 billion Extended Fund Facility by the International Monetary Fund (IMF) in September. It expects industrial growth to accelerate due to the suspension of import restrictions, increased investor confidence, and improved access to foreign exchange. Additionally, a monetary policy easing that would most likely be spurred by faster-than-expected reduction in inflationary pressures would positively support overall economic activity.

However, the report highlighted some risks to agricultural performance in the form of heavy monsoon rains and flood-like conditions during July–September 2024. It is expected that these adverse conditions will impact major crops such as wheat and cotton negatively in FY25. The ADB also downwardly revised its inflation forecast for Pakistan from 15% in September to 10%, as inflation numbers declined to single digits in August. This trend was accounted for by the “high base effect,” reduced demand-side pressures, improved supplies of essential food items, favorable global commodity prices, and delayed hikes in administered energy tariffs.

The ADB scaled down its growth forecast for the broader South Asia region. While Pakistan and Sri Lanka’s forecasts were increased on account of signs that their economies are recovering, Bangladesh and the Maldives’ projections were reduced. The report cited the ongoing impact of political unrest in Bangladesh during July–August 2024 and the fiscal tightening measures in the Maldives as key determinants of their respective economies.

Meanwhile, the Asian Development Bank (ADB) said it has approved an additional $330 million in financing to strengthen Pakistan’s federally administered social protection programs. The funding is provided under the ongoing Integrated Social Protection Development Program (ISPDP) and will expand grassroots-level social protection efforts to alleviate poverty, particularly among poor women and their families. The ADB explains that the program will enhance the institutional capacity of the Benazir Income Support Programme (BISP) in its efforts to transition toward adaptive and climate-resilient social protection systems. This program includes enhancing access to education for children and youth from low-income families and enhancing access to health services and nutritional support for beneficiaries in disaster-prone areas. Yevgeniy Zhukov, ADB Director General for Central and West Asia, stated that the initiative will contribute to strengthening Pakistan’s efforts to improve human capital development and combat intergenerational poverty, focusing especially on women who are disproportionately affected during economic challenges. “ADB’s additional financing will help boost the government’s ability to reach more of the poorest and most vulnerable in Pakistan,” he said.

In addition, the ADB highlighted potential long-term impacts of expected policy changes in the United States under President-elect Donald Trump. The agency indicated that the changes in U.S. trade, fiscal, and immigration policies would influence growth and inflation in the developing economies of the region, and the effects were likely to become significant from 2026 onwards. However, if these policies are adopted earlier or at a faster pace, then their effects can be felt even earlier, and some dislocations from companies importing earlier than necessary to avoid tariffs. According to ADB Chief Economist Albert Park, the regional outlook was, “Strong overall domestic demand and exports continue to drive economic expansion in our region. However, the policies expected to be implemented by the new U.S. administration could slow growth and increase inflation in China and other economies in Asia and the Pacific, most likely after next year.”

The report indicated that, despite the risks presented by U.S. policy changes, such as the imposition of high tariffs, the impacts on developing Asia and the Pacific are expected to remain limited under the current high-risk scenario. President-elect Trump has proposed significant tariffs targeting key trading partners, including Canada, Mexico, and China, describing tariffs as a “powerful tool” not only for economic purposes but also as leverage in broader geopolitical matters.

Pakistan’s recent steps toward macroeconomic stability have been further supported by measures like the Extended Fund Facility of the IMF and greater investor confidence. While bad weather is likely to create challenges for agriculture and similar sectors, the easing of inflationary pressures and the better availability of resources make Pakistan a more optimistic picture for FY25. On a regional scale, varying forecasts reflect South Asia’s diverse economic landscapes and challenges. ADB’s continued support, including social protection initiatives, strengthens Pakistan’s path toward sustainable development, human capital improvement, and poverty alleviation.