• World Bank cuts forecast by 0.5pc, predicts inflation may shoot to 7.2pc; exports to decline 1.5pc
• WB official says removing barriers to women’s participation in job market can boost GDP per capita by 20-30pc
ISLAMABAD: The World Bank on Tuesday cut its growth forecast for Pakistan by half a per cent to 2.6 per cent for the current fiscal year due to the recent floods[1], which are also expected to push up inflation to 7.2 per cent.
“For FY 2025/26, real GDP growth is projected to remain around 2.6pc, as ongoing catastrophic floods have damped the forecast,” the Washington-based lending agency said in its regional economic outlook for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) region.
The bank had earlier projected a 3.1pc growth rate for the country in its previous biannual outlook in April 2025. Pakistan had set 4.2pc growth target[2] and has since been looking at 3.5pc as part of its IMF engagements.
“Early estimates suggest a drop of at least 10 per cent in agricultural output in Punjab, affecting major crops such as rice, sugarcane, cotton, wheat, and maize,” it said. “For FY 2026/27, growth is expected to accelerate to 3.4pc, supported by higher agricultural output, lower inflation and interest rates, recovering consumer and business confidence, and a rebound in private consumption and investment,” it said.
Looking ahead, Pakistan, which had historically maintained high tariffs with a complex structure, stands to benefit in terms of exports and growth from a recently approved five-year reform plan (2025–2030) to reduce its tariffs[3] by half, the lender said.
It said the country’s inflation rate dropped to single digits in FY2024-25, as price increases for food and energy eased. However, disruption to food supply chains due to ongoing catastrophic floods is expected to push inflation up through 2027, it said and also anticipated about 1.5pc decline in its global exports.
It said the poverty rate in Pakistan dropped by 9.4 percentage points between 2011 and 2018, the year of the most recent available estimate. However, a combination of economic shocks and natural disasters since 2020 is projected to have stalled this trend of poverty reduction. Furthermore, due to its relatively high poverty rate and large population, the country accounts for a large share of MENAAP’s (Middle East, North Africa, Afghanistan and Pakistan) poor.
Regional economic outlook
Overall, the economic report pointed to an improved economic outlook for the region, with expected growth reaching 2.8pc in 2025 and 3.3pc in 2026. However, global uncertainty, trade policy shifts, and continued conflict and displacement all pose possible risks.
It said the countries in the Gulf Cooperation Council (GCC) will likely benefit from phasing out voluntary oil production cuts and growth in their non-oil industries while oil-importing countries are also expected to see economic improvements, thanks to private spending and investments as well as a rebound in agriculture and tourism. However, oil-exporting developing countries may see a significant slowdown because of conflict and reduced oil production.
Women’s talents and skills
The report said the countries in the region could improve more lives by tapping into the full potential of their workforce as women’s talents and skills remained significantly underutilised. The data shows that only about one in five women participates in the labour force—the lowest rate in the world—despite significant gains in education and skills.
“I urge bold action—not partial measures,” said Ousmane Dione, vice president for the World Bank’s MENAAP region. “To unlock the full potential of women in the region, we must tackle every barrier to their inclusion with comprehensive measures. A vibrant private sector that creates jobs and transforms aspirations is key to real progress.”
Drawing on analysis that considers household choices, social norms, legal rules, and the role of businesses, the report offers estimates of how much MENAAP economies stand to gain by removing the barriers that prevent women from fully participating in the workforce. No other region stands to benefit more from eliminating these constraints.
“Increasing female labour force participation can translate into immense economic gains,” said Roberta Gatti, chief economist for the region. “Removing barriers that prevent women from accessing jobs could boost GDP per capita by 20 to 30 per cent in economies like Egypt, Jordan, and Pakistan,” she said.
The report said the working-age population in MENAAP was set to grow by over 220 million people by 2050, close to a 40pc rise, the second-largest across all regions.
At the same time, the region is also rapidly approaching a demographic crisis, with declining fertility rates and an aging population.
Pakistan has one of the highest fertility rates in the region, at 3.5. However, its demographic transition is following a similar trajectory as its peers, only delayed, with the fertility rate projected to fall below replacement level within one generation. It said Pakistan was yet to achieve the female enrollment rates prevalent in the rest of the region (outside of conflict-afflicted countries).
Over the past 25 years, countries such as Saudi Arabia, Pakistan, Tunisia, and Algeria have made measurable strides in female labour-force participation, although rates remain among the lowest compared to their income peers. Notably, in Saudi Arabia, the participation rate increased by nearly 14 percentage points between 2017 and 2023. In Pakistan, it grew by 8 percentage points between 2000 and 2021.
In Pakistan, two-thirds of college-educated women are out of the labour force, despite having aspirations and job-application rates comparable to those of men. Importantly, marriage proposals often surge right after graduation, limiting the time available to women to search for a job.
The report noted that the United Arab Emirates (19 positive reforms), Saudi Arabia (18), Bahrain (12), Jordan (10), and Pakistan (8) were the top reformers in the region, particularly in areas such as the workplace and pay during the period since 2010.
Published in Dawn, October 8th, 2025