Pakistan

Strong policy implementation has continued to support Pakistan’s economic recovery, build confidence, and bolster its resilience to shocks. GDP growth accelerated in FY26H1, while inflation remained contained, the current account was broadly balanced, and reserve rebuilding exceeded earlier projections. However, the impact of the war in the Middle East clouds Pakistan’s near-term outlook and there is great uncertainty about how developments will unfold. Under the baseline scenario, the war is expected to put upward pressure on inflation and weigh on growth and the balance of payments, but the overall impact is expected to be contained. However, downside risks are high.