Pakistan’s economy is projected to grow by 3.5% in 2026, signaling a positive recovery despite recent challenges, according to the United Nations’ ‘World Economic Situation and Prospects 2026’ report. Early signs are visible in the first quarter of FY26, which recorded a growth rate of 3.71%, sharply up from 1.80% in the same period last year.
The report highlights that Pakistan’s economic fundamentals are strengthening. The current account posted a surplus in FY25, fiscal targets for the primary balance were exceeded, inflation remained under control, and external reserves showed improvement.
Planning Minister Ahsan Iqbal noted the strong performance of the industrial sector as a key driver, with industrial output surging by 9.38% in Q1 FY26 compared to just 0.12% growth in Q1 FY25.
He said, “This growth shows a qualitative change in the economy’s base, providing a stronger foundation for recovery despite external and domestic challenges.”
However, the UN report also cautions that adverse shocks, including the 2025 floods, energy subsidy withdrawals, fiscal tightening, and food-price pressures, could pose risks to sustained growth, fiscal consolidation, and poverty reduction. Analysts say that continued IMF-supported reforms and a focus on industrial expansion will be critical to maintain momentum.
Pakistan’s economy faced slower growth last year due to inflationary pressures, natural disasters, and energy shortages. With structural reforms underway and better macroeconomic management, the economy is showing resilience, offering optimism for investors, policymakers, and the public.