Pakistan’s FY26 GDP Growth: Recovery Signs Tempered by Missing Targets and Stagnant Living Standards
Pakistan’s economy is showing signs of recovery, with both gross domestic product (GDP) and per capita income increasing in dollar terms. However, the growth remains modest, and the government has revised its expectations downward, signaling that the country will likely fall short of its original economic targets for the current fiscal year.
- GDP Growth: Expected to grow by 3.70% in FY26, revised down from an initial 4% projection.
- Economy Size: Expanded to $452.1 billion in FY26, up from $410.96 billion in FY25.
- Per Capita Income: Rose slightly to $1,901 in FY26, though historical data suggests a long-term deterioration in living standards.
- Sectoral Performance: Services led growth at 4.09%, followed by industry (3.51%) and agriculture (2.89%).
The Macro Picture: Growth and Projections
During the 117th meeting of the National Accounts Committee (NAC), chaired by the secretary of the Ministry of Planning and Development at the Pakistan Bureau of Statistics Headquarters, officials approved the provisional and revised growth rates for the 2025-26 fiscal year.
The data reveals a trajectory of slow but steady improvement. The GDP showed provisional growth of 3.99% during Q3 of FY26, while the revised growth rates for Q1 and Q2 were set at 3.92% and 4.05%, respectively. For context, the final and revised growth rates for FY24 and FY25 stood at 2.62% and 3.18%.
The Per Capita Paradox: Income vs. Well-being
While the nominal figures show an increase in per capita income—rising to $1,901 in FY26 from $1,824 in FY25—the broader trend is concerning. When compared to figures from previous years ($1,766 in FY22, $1,677 in FY21, and $1,551 in FY23), the growth has not translated into a tangible increase in personal wealth for most citizens.
This stagnation indicates a deterioration in the standard of living across nearly all societal segments. For the average Pakistani, this means decreased disposable income, which directly limits the ability to save, invest, or afford essential goods and services.
Sectoral Analysis: Drivers and Drags
Agriculture: A Mixed Harvest
The agriculture sector grew by 2.89% provisionally. This growth was uneven, with “important crops” seeing a modest increase of 0.65% due to conflicting production trends:
- Gainers: Sugarcane (+6.20%), Wheat (+4.3%), and Rice (+2.80%).
- Losers: Maize (-2.68%) and Cotton (-0.5%).
Other crops performed significantly better, growing by 2.43%, driven by massive surges in grams (50.4%), bananas (30.8%), potatoes (27.6%), and turmeric (25.1%). Livestock also contributed positively with a 3.75% increase, while forestry and fishing grew by 2.02% and 1.66%, respectively.
Industry: LSM Strength vs. Utility Decline
The industrial sector posted a provisional growth of 3.51%. A standout performer was Large Scale Manufacturing (LSM), which witnessed a 6.11% growth between July and March. This was driven by high performance in automobiles (61.66%), transport equipment (39.93%), furniture (20.45%), and electrical equipment (11.87%).
However, the industrial sector faced two major headwinds:
- Mining and Quarrying: Only grew by 0.38%, as declines in natural gas (-2.63%) and crude oil (-0.38%) offset a 4.52% increase in coal production.
- Utilities: The electricity, gas, and water supply industry contracted by 10.63%, a result of lower energy subsidies and a high base effect from the previous year.
On a positive note, the construction industry increased by 5.73%, fueled by higher expenditures from the general government and the private sector.
Services: The Primary Engine
The services industry was the strongest overall performer, growing by 4.09% in FY26. This growth was broad-based, with positive contributions across all constituents:
- Public Administration and Social Security: 8.54%
- Information and Communication: 7.52%
- Human Health and Social Work: 6.85%
- Education: 5.23%
- Wholesale and Retail Trade: 3.71%
Looking Ahead
Pakistan’s economy is moving in the right direction in terms of total output and sectoral recovery, but the pace is insufficient to lift the general population out of economic hardship. The revision of the GDP growth target from 4% to 3.70% suggests that structural challenges persist. For investors and policymakers, the focus must shift from nominal GDP growth to improving per capita productivity and disposable income to ensure the recovery is inclusive.