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Pakistan Forecasts Continued Economic Recovery and Low Inflation in Early FY2026 Pakistan’s economic indicators continue to show encouraging signs as the new fiscal year unfolds. According to the Finance Ministry’s Monthly Economic Report, inflation in July 2025 is projected to remain between 3.5% and 4.5%, underpinned by stable pricing trends and improved supply conditions. This prediction follows a significant drop in inflation during FY2025, signaling a period of macroeconomic stability and cautious optimism for FY2026. The ministry believes the economy is gaining traction on multiple fronts—particularly in manufacturing, trade, and investment confidence—despite concerns over climate-related risks impacting agriculture and logistics. July Inflation Expected to Stay Low Consumer Price Inflation Projected at 3.5–4.5% Inflationary pressures in Pakistan are expected to remain subdued in July 2025, with the government estimating consumer price growth within the 3.5% to 4.5% range. This easing is attributed to improved supply chains, better stock management, and minimal volatility in domestic markets. Strong Supply Chain and Stable Prices Support Forecast Thanks to stable commodity prices globally and controlled fuel costs, Pakistan is experiencing better price control in essential goods. Enhanced availability of food and non-food items is also playing a critical role in maintaining inflation within manageable levels. FY2025 Records Lowest Inflation in Nearly a Decade Average Inflation Falls to 4.49% The fiscal year ending June 30, 2025, saw average inflation decline to 4.49%, marking the lowest annual rate in nine years. This is a massive improvement from 23.4% recorded in FY2024, showcasing the effectiveness of fiscal and monetary stabilization measures. Down from 23.4% in Previous Fiscal Year This sharp decline is a result of prudent monetary policy, improved exchange rate management, and an easing of imported inflation. The government’s commitment to price control and policy consistency has contributed significantly to this turnaround. Economic Momentum to Continue into FY2026 Solid Macroeconomic Fundamentals Drive Growth The Finance Ministry forecasts that Pakistan’s economic recovery will remain on track in the early months of FY2026. This is driven by: Controlled inflation Stable currency Renewed investor interest Favorable global commodity conditions Rising Investor Confidence and Market Optimism Increased private sector lending and upticks in consumer demand signal renewed market optimism. The government believes that greater fiscal discipline and a pro-business environment will encourage both domestic and foreign investment moving forward. Industrial Sector Shows Positive Indicators Large-Scale Manufacturing Gains Ground Pakistan’s Large-Scale Manufacturing (LSM) segment maintained momentum in June 2025, supported by robust production activity and greater credit availability for businesses. Key industries like textiles, cement, and automobiles are leading this recovery. Surge in Private Sector Lending Fuels Production An increase in credit to private enterprises has spurred capital investment and output growth. The Finance Ministry sees this trend as essential for maintaining production cycles and job creation in FY2026. Boost in Trade and External Sector Stability Higher Imports of Inputs, Better Export Performance With industrial recovery gaining speed, the demand for raw materials and intermediate goods has risen. At the same time, value-added exports—especially in textiles and pharmaceuticals—are expected to benefit from stronger international demand. Strong Remittances, Stable Exchange Rates Support Growth Stable exchange rates, continued inflows of remittances, and a favorable balance of trade are expected to reinforce external sector stability in July 2025 and beyond. Automobile and Cement Sectors Perform Robustly Auto Sector Sees Remarkable Growth Across Categories The automotive industry emerged as a major growth driver in FY2025: Cars: Up 40% Trucks & Buses: Up 96.8% SUVs & Pickups: Up 74.6% This resurgence reflects improving consumer confidence and production efficiency. Cement Exports Soar Despite Domestic Sales Dip Total cement dispatches reached 46.2 million tonnes, a 2.1% year-on-year increase. However: Domestic sales fell by 3.1% to 37 million tonnes Exports surged 29.5% to hit 9.2 million tonnes This points to a shift in demand patterns and Pakistan’s growing role in regional cement exports. Climate Risks May Affect Agriculture and Inflation Heavy Rains Pose Threat to Crops and Logistics Despite positive macroeconomic trends, recent heavy monsoon rains threaten to disrupt agriculture and transport supply chains. Flooding could lead to shortages of perishable goods, impacting short-term inflation trends. Over 266 Lives Lost, Hundreds Injured in Flood-Related Incidents Since June 26, flood-related disasters have claimed at least 266 lives, with over 630 injuries and 1,557 homes destroyed, according to the National Disaster Management Authority. The government is closely monitoring the situation as part of its inflation risk assessment. ADB Predicts Moderate Yet Stable Growth for FY2026 Pakistan’s GDP Expected to Grow by 3% In its latest forecast, the Asian Development Bank (ADB) expects Pakistan’s economy to expand by 3% in FY2026, reflecting a moderate but steady recovery amid fiscal reforms and policy adjustments. Regional Challenges Temper Broader Growth Expectations While Pakistan is poised for recovery, the ADB noted that regional uncertainty and global trade headwinds could temper overall growth in Asia. Still, Pakistan’s performance is seen as resilient in a challenging global environment.

Pakistan Forecasts Continued Economic Recovery and Low Inflation in Early FY2026. Pakistan’s economic indicators continue to show encouraging signs as the new fiscal year unfolds. According to the Finance Ministry’s Monthly Economic Report, inflation in July 2025 is projected to remain between 3.5% and 4.5%, underpinned by stable pricing trends and improved supply conditions. This prediction follows a significant drop in inflation during FY2025, signaling a period of macroeconomic stability and cautious optimism for FY2026.

The ministry believes the economy is gaining traction on multiple fronts—particularly in manufacturing, trade, and investment confidence—despite concerns over climate-related risks impacting agriculture and logistics.


July Inflation Expected to Stay Low

Consumer Price Inflation Projected at 3.5–4.5%

Inflationary pressures in Pakistan are expected to remain subdued in July 2025, with the government estimating consumer price growth within the 3.5% to 4.5% range. This easing is attributed to improved supply chains, better stock management, and minimal volatility in domestic markets.

Strong Supply Chain and Stable Prices Support Forecast

Thanks to stable commodity prices globally and controlled fuel costs, Pakistan is experiencing better price control in essential goods. Enhanced availability of food and non-food items is also playing a critical role in maintaining inflation within manageable levels.


FY2025 Records Lowest Inflation in Nearly a Decade

Average Inflation Falls to 4.49%

The fiscal year ending June 30, 2025, saw average inflation decline to 4.49%, marking the lowest annual rate in nine years. This is a massive improvement from 23.4% recorded in FY2024, showcasing the effectiveness of fiscal and monetary stabilization measures.

Down from 23.4% in Previous Fiscal Year

This sharp decline is a result of prudent monetary policy, improved exchange rate management, and an easing of imported inflation. The government’s commitment to price control and policy consistency has contributed significantly to this turnaround.


Economic Momentum to Continue into FY2026

Solid Macroeconomic Fundamentals Drive Growth

The Finance Ministry forecasts that Pakistan’s economic recovery will remain on track in the early months of FY2026. This is driven by:

  • Controlled inflation

  • Stable currency

  • Renewed investor interest

  • Favorable global commodity conditions

Rising Investor Confidence and Market Optimism

Increased private sector lending and upticks in consumer demand signal renewed market optimism. The government believes that greater fiscal discipline and a pro-business environment will encourage both domestic and foreign investment moving forward.


Industrial Sector Shows Positive Indicators

Large-Scale Manufacturing Gains Ground

Pakistan’s Large-Scale Manufacturing (LSM) segment maintained momentum in June 2025, supported by robust production activity and greater credit availability for businesses. Key industries like textiles, cement, and automobiles are leading this recovery.

Surge in Private Sector Lending Fuels Production

An increase in credit to private enterprises has spurred capital investment and output growth. The Finance Ministry sees this trend as essential for maintaining production cycles and job creation in FY2026.


Boost in Trade and External Sector Stability

Higher Imports of Inputs, Better Export Performance

With industrial recovery gaining speed, the demand for raw materials and intermediate goods has risen. At the same time, value-added exports—especially in textiles and pharmaceuticals—are expected to benefit from stronger international demand.

Strong Remittances, Stable Exchange Rates Support Growth

Stable exchange rates, continued inflows of remittances, and a favorable balance of trade are expected to reinforce external sector stability in July 2025 and beyond.


Automobile and Cement Sectors Perform Robustly

Auto Sector Sees Remarkable Growth Across Categories

The automotive industry emerged as a major growth driver in FY2025:

  • Cars: Up 40%

  • Trucks & Buses: Up 96.8%

  • SUVs & Pickups: Up 74.6%

This resurgence reflects improving consumer confidence and production efficiency.

Cement Exports Soar Despite Domestic Sales Dip

Total cement dispatches reached 46.2 million tonnes, a 2.1% year-on-year increase. However:

  • Domestic sales fell by 3.1% to 37 million tonnes

  • Exports surged 29.5% to hit 9.2 million tonnes

This points to a shift in demand patterns and Pakistan’s growing role in regional cement exports.


Climate Risks May Affect Agriculture and Inflation

Heavy Rains Pose Threat to Crops and Logistics

Despite positive macroeconomic trends, recent heavy monsoon rains threaten to disrupt agriculture and transport supply chains. Flooding could lead to shortages of perishable goods, impacting short-term inflation trends.

Over 266 Lives Lost, Hundreds Injured in Flood-Related Incidents

Since June 26, flood-related disasters have claimed at least 266 lives, with over 630 injuries and 1,557 homes destroyed, according to the National Disaster Management Authority. The government is closely monitoring the situation as part of its inflation risk assessment.


ADB Predicts Moderate Yet Stable Growth for FY2026

Pakistan’s GDP Expected to Grow by 3%

In its latest forecast, the Asian Development Bank (ADB) expects Pakistan’s economy to expand by 3% in FY2026, reflecting a moderate but steady recovery amid fiscal reforms and policy adjustments.

Regional Challenges Temper Broader Growth Expectations

While Pakistan is poised for recovery, the ADB noted that regional uncertainty and global trade headwinds could temper overall growth in Asia. Still, Pakistan’s performance is seen as resilient in a challenging global environment.

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