MediumIV Macro Policy & Sovereign Debt19 October 2026, Monday
Pakistan's fourth-quarter growth slows to 2% and the target is missed
The National Accounts Committee lowered 2025-26 fiscal year growth from 3.70% to 3.65% on 19 October. Growth in the April-June quarter fell to 2% from 6.1% a year earlier, and industry contracted 4.7% in the same quarter.
According to Dawn, the 118th National Accounts Committee, meeting at the Pakistan Bureau of Statistics, cut the growth estimate announced in May from 3.70% to 3.65%; the original target was 4%. In the revision, agricultural growth rose from 2.89% to 3.50% while industry fell from 3.51% to 3.34% and services from 4.09% to 3.81%. The size of the economy rose from 410.96 billion dollars in fiscal 2025 to 450.4 billion, and income per head from 1,824 dollars to 1,896.
The real break is in the final quarter. According to the Express Tribune, growth in April-June 2026 slowed to 2% after a high base of 6.1% in the same quarter a year earlier. Industry shrank 4.7%, and the electricity, gas and water line contracted 33.2%. The paper attributes the fall to the base effect, fiscal tightening and fuel prices rising after the Middle East conflict and suppressing demand. On figures relayed by Dawn, annual growth in large-scale manufacturing was revised from 6.11% to 5.01%.
The revision rewrote the past as well. According to the Express Tribune, once import data compilation moved from PRAL to the Pakistan Single Window system, imports for fiscal years 2021 to 2025 were revised up by 14.8 billion dollars in total; fiscal 2025 imports alone rose by 6.1 billion to 64.5 billion. Growth in fiscal 2025 was also cut from 3.18% to 3.11%. The IMF's forecast for fiscal 2026 was 3.6%, and those of the World Bank and the Asian Development Bank 3.7%.
Talay assessment
Bottom line
The 0.05 point adjustment to the annual figure is noise; the signal is industry contracting 4.7% and growth falling to 2% in the final quarter. The fuel shock and fiscal tightening left Pakistan entering the year with weak momentum. A 14.8 billion dollar import revision shows the external balance is more fragile than assumed, and the most likely path is growth below 4% in fiscal 2027 as well.
Likely effects
- External balanceNegative1–6 months
Revising five years of imports up by 14.8 billion dollars shows the current account deficit and the external financing need were measured lower than they were.
- Industry and energyNegativeWeeks
The electricity, gas and water line shrinking 33.2% in the final quarter points to high fuel prices suppressing output directly.
- Trade with TürkiyeNegative1–6 months
Weaker demand could press both volumes and payments in Turkish exports to Pakistan and in contracting projects there.
Possibilities, ranked
- 1Weak recovery55%
Even with fuel prices easing, fiscal tightening persists and fiscal 2027 growth holds in a 3-4% band.
Watch: The large-scale manufacturing index for July-September 2026
- 2Close to stagnation30%
Tension on the Afghan border and the oil shock continue, and the industrial contraction carries into the first quarter.
Watch: The Pakistan Bureau of Statistics' first-quarter growth print
- 3Rapid recovery15%
Falling fuel prices revive demand and growth climbs above 4%.
Watch: The IMF raising its growth forecast at the next review
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- FY2026 growth▼ 3.65%
- April-June growth▼ 2%
- Import revision▼ +$14.8bn