The Asian Development Bank (ADB) has revised Pakistan's economic growth forecast downward to 3.7% for the fiscal year 2027, marking the third lowest rate in South Asia. Simultaneously, the inflation forecast has been raised to 8.3%, the second highest in the region after Bangladesh. These adjustments are detailed in the Asian Development Outlook, the ADB's flagship biannual publication.
Key Forecast Revisions
The ADB cited the broader impacts of the Middle East conflict as a primary reason for the downgrade. Pakistan's economy grew at the same rate of 3.7% in the last fiscal year. In April, the ADB had projected 4.5% growth for FY2027, which has now been revised down by nearly one percentage point. The International Monetary Fund (IMF) has given a 3.5% growth forecast for the same period.
According to the ADB report, Pakistan's "economic growth forecast is revised down to 3.7% for FY2027 due to higher energy costs and pressure on remittances." At this rate, Pakistan will be the third slowest growing economy in South Asia, ahead of only Afghanistan and Maldives, both projected at 3%. India leads the region with 7.3% growth, followed by Bhutan at 7.2%.
Inflation and Monetary Policy
Pakistan's inflation forecast for FY2027 has been revised upward to 8.3%, driven by "persistent adverse spillover from the Middle East conflict." This is the second highest in the region after Bangladesh's 8.8%. In comparison, India's inflation forecast is just 4%, partly because the Indian government did not increase taxes on petrol and diesel as Pakistan did.
The ADB noted that inflation breached target ranges in early 2026 in several countries including Pakistan. Central banks responded with rate holds and selective hikes. In April-June, Pakistan, Indonesia, and Sri Lanka raised policy rates by 100 basis points, while the Philippines raised by 50 points and Georgia by 25 points.
US Tariff Threats
The ADB also highlighted that Pakistan is among 60 nations that may face additional US tariffs of 10% to 12.5% starting July 24. The report states that recent US trade policy developments indicate restrictions are likely to remain broad despite the Supreme Court's invalidation of key tariff measures.
On February 20, 2026, the US Supreme Court ruled tariffs under the International Emergency Economic Powers Act (IEEPA) invalid. The Trump administration responded by invoking Section 122 of the Trade Act of 1974, imposing a 10% global import surcharge effective February 24, 2026. Section 122 caps tariffs at 15% and limits them to 150 days, so the measure expires on July 24, 2026. The administration plans to seek a more durable legal basis under Section 301.
The ADB noted that the effective tariff rate for developing Asia and the Pacific stands at 24.8%, nearly double the pre-April 2025 rate. In March, the US Trade Representative launched investigations into 60 economies over alleged failure to prohibit imports made with forced labor. On June 2, 2026, the USTR proposed additional tariffs of 10%-12.5% on these economies, including a 10% tariff for Pakistan, Bangladesh, Cambodia, Indonesia, Malaysia, and Taipei, China.
Public hearings are scheduled for July 7-15, 2026. Pakistan's commerce ministry stated that the country has already banned imports of goods produced by forced labor. A Pakistani delegation is currently in the US to negotiate a deal to avoid the tariffs that would apply from July 24.
