Islamabad, Zubair Kasuri: The Asian Development Bank (ADB) has warned that Pakistan’s economic recovery faces renewed pressure from higher energy and food costs, geopolitical disruptions and a potentially very strong El Niño, while economic growth is projected to remain at 3.7 percent and inflation is expected to rise to 8.3 percent.
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According to the Asian Development Outlook September 2026, Pakistan’s GDP growth is projected at 3.7 percent for 2026 and again at 3.7 percent for 2027. Inflation, however, is forecast to accelerate from 7.1 percent in 2026 to 8.3 percent in 2027, highlighting the risk of stronger price pressures despite modest economic growth.
The ADB said persistent disruption in global energy markets has spread beyond crude oil to refined petroleum products and major shipping routes. Diesel, gasoline and jet fuel markets have tightened sharply, potentially keeping transport, industrial and agricultural costs elevated even if crude oil prices ease.
For energy-importing economies such as Pakistan, the combination of elevated fuel prices and disruption to key Gulf shipping routes presents an additional vulnerability. The report noted that Asia and the Pacific remains dependent on Gulf crude and exposed to disruption along major shipping routes despite efforts to diversify supplies.
A particularly significant warning concerns El Niño. The ADB expects the current El Niño to intensify through late 2026 and peak around November, with sea-surface temperature anomalies approaching 2.9°C. It could rank among the strongest El Niño events on record, with its largest economic effects across Asia and the Pacific likely to emerge during 2027.
The weather phenomenon could add to inflationary pressures through several channels. Higher temperatures and deficient rainfall threaten agricultural production, while elevated fuel and fertilizer costs could further increase food production expenses. At the same time, higher temperatures could raise electricity demand for cooling while weaker rainfall reduces hydropower generation, increasing demand for petroleum fuels and LNG.
The report identifies South Asia as particularly exposed to the transmission of higher energy costs into food prices because food carries a relatively large weight in household consumption. ADB forecasts South Asian inflation at 5.5 percent in 2026 and 4.8 percent in 2027, compared with Pakistan’s substantially higher projected rate of 8.3 percent in 2027.
The ADB also cautioned that the wider regional outlook remains tilted to the downside, with an escalation of conflicts, extreme weather, tighter financial conditions and renewed trade uncertainty capable of weakening growth and adding to inflation.
The report said governments should prepare before severe weather effects materialise, particularly by strengthening agriculture, water and power systems. It also called for support to vulnerable households to be targeted and time-bound, while central banks should remain prepared to respond if temporary price increases become persistent.
For Pakistan, the ADB projections point to a challenging combination in 2027: growth remaining at 3.7 percent while inflation rises to 8.3 percent, with energy-market disruption and El Niño posing additional risks to food prices, agriculture and the cost of energy.
