Pakistan’s economy is expected to sustain its positive trajectory in the coming months, buoyed by robust industrial growth, improved governance, and prudent macroeconomic management, according to the Finance Ministry’s Monthly Economic Update and Outlook for December 2025.
The report highlights a favorable outlook, driven by continued expansion in key industrial sectors such as textiles, automobiles, cement, and food processing. In the first quarter of fiscal year 2026, gross domestic product (GDP) grew by 3.71 percent, with industry leading the way at 9.38 percent growth, followed by agriculture at 2.89 percent and services at 2.35 percent.
High-frequency indicators point to ongoing recovery, with large-scale manufacturing rising 5.02 percent during July-October and accelerating to 8.3 percent year-on-year in October. Notably, car production surged 65 percent in the first five months of the fiscal year.
Inflation showed signs of easing, with consumer prices rising 6.1 percent in November compared to 6.2 percent in October. The government expects inflation to remain moderate, between 5.5 and 6.5 percent in December, largely due to base effects.
The improved inflation outlook enabled the State Bank of Pakistan to cut its policy rate by 50 basis points to 10.5 percent in December, supporting credit conditions and investor confidence.
On the external front, Pakistan’s current account posted a $100 million surplus in November, though the July-November period saw a deficit of $812 million as imports outpaced exports. Goods imports rose 11.1 percent to $25.6 billion, while exports declined 3.2 percent to $12.8 billion. However, services exports—driven by information technology—grew 16.7 percent.
Workers’ remittances remained a key support, increasing 9.3 percent to $16.1 billion in the first five months of the fiscal year. Foreign exchange reserves climbed to $21 billion as of December 19, the highest level since March 2022, bolstered by inflows from the International Monetary Fund after a successful program review.
On the fiscal side, improved revenue collection and controlled spending resulted in a consolidated fiscal surplus of 1.0 percent of GDP during July-October, up from 0.4 percent a year earlier. Federal tax revenues rose 10.2 percent during July–November, led by gains in direct taxes and federal excise duty.
Agriculture also showed positive momentum ahead of the Rabi season, with agricultural credit disbursements up 18.6 percent and imports of farm machinery rising more than 27 percent, as the government targets a wheat output of nearly 30 million tonnes.
The Finance Division concluded that the economic outlook remains positive, supported by ongoing industrial recovery, steady remittance inflows, and fiscal consolidation. While risks persist from higher import demand and global uncertainty, officials remain optimistic that macroeconomic stability will underpin growth in the months ahead.
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