What rates of economic growth have the World Bank projected for FY26?
During 2025, the World Bank has published three different estimates for FY26 GDP growth, reflecting our publication timetable and attempts to reflect latest available developments and data.
The World Bank Pakistan typically produces economic projections every six months. Projections are published in three half-yearly reports: the Pakistan Development Update, the global Macro-Poverty Outlook (MPO), and the regional Economic Update. Typically, projections are aligned across publications and published almost simultaneously.
In 2025, however, publication of the Pakistan Development Update lagged publication of the MPO and the regional Economic Update for scheduling reasons. The Pakistan Development Update also included slightly different growth projections for FY26. This is shown below.
| Date | Projected FY26 GDP Growth Rate |
· Pakistan Development Update | April 2025 | 3.1 |
· Macro Poverty Outlook · Middle East, North Africa, Afghanistan & Pakistan Economic Outlook | October 7, 2025 | 2.6 |
· Pakistan Development Update | October 28, 2025 | 3.0 |
Why did projected economic growth rates change between the regional Economic Update and the Pakistan Development Update?
Estimates in the October Pakistan Development Update reflected new information about the impacts of recent flooding.
Economic projections for the MPO and in the regional Economic Update were prepared amid major flooding. Initial data suggested very significant impacts on agricultural production, especially in Punjab. The MPO and regional Economic Update therefore included projected 2.6 percent GDP growth rate for FY26. These estimates were clearly expressed as a ‘flood scenario’ based on ‘early estimates’ of flood impacts. The reports noted “significant uncertainty, with the full extent of the damage still to be determined”.
After economic projections for these publications had been finalized, additional data on flood impacts was shared with the World Bank by the government and the UN Food and Agriculture Organization. This data suggested smaller impacts on agricultural output than had been initially estimated. Because the Pakistan Development Update was scheduled for later publication, the World Bank team were able to revise GDP growth estimates using new data. This led to a slightly higher projected GDP growth rate of 3.0 percent for FY26 being included in the Pakistan Development Update report, compared to 2.6 percent included in the MPO and regional Economic Update.
What estimates of the poverty rate have recently been published by the World Bank?
The PDU published the projected national poverty rate for FY25, estimated at 22.2 percent in FY25.
This is a modest decrease from the FY24 estimate of 25.3 percent. The poverty projections are derived from the World Bank's internal poverty projection methodology, which is based on a microsimulation model.
Due to strong growth that took place between FY24 and FY25 in the construction and logistics sectors, which together employ about one quarter of the poor, some segments of the poor were able to benefit from higher labor incomes. Moreover, a sharp drop in food inflation in FY25 supported income increases by easing price pressures and improving purchasing power for the poor.
Early signs of economic recovery in FY25 are estimated to have translated into some welfare improvements for certain segments of the poor, such as those working in construction and logistics. Yet, given the high degree of job informality in these sectors, especially for low-skill work, volatility in growth of these sectors can sharply diminish real wages for the poor when there is a shock. Moreover, other segments of the poor, such as the rural poor, have not seen an improvement in their living standards due to low agricultural growth.
This is why it is important to focus on broader, long-term trends—such as those outlined in the Pakistan Poverty, Equity, and Resilience Assessment—rather than year-on-year fluctuations. The modest decline in the FY25 poverty rate should not be seen as a significant departure from previous trends but an encouraging sign that economic stabilization is mirrored in welfare improvements. Modeled estimates provide useful directional insights but do not carry the statistical precision of survey-based figures.
Why do estimated poverty rates using the national poverty line change so frequently?
This is because, in Pakistan, we update poverty figures every time GDP projections are adjusted.
Traditionally, official national poverty rates are based on the Household Integrated Economic Survey (HIES). Since there are large gaps between survey rounds, the World Bank uses a projection methodology to estimate poverty in the interim period.* We produce an econometric estimate of the likely poverty rate, using available economic data and projections.
This approach projects each household’s consumption over time by simulating the evolution of real labor and non-labor income. The resulting consumption distribution is then used to produce poverty projections. The key inputs to this model are the (1) sub-sector GDP growth rates (2) product-level inflation and (3) private and public transfers. As GDP estimates and forecasts are revised, revised poverty estimates are produced by the microsimulation model.
What do we know about the long-term poverty developments in Pakistan?
Pakistan made notable strides in reducing poverty and boosting prosperity in the early 2000s, but progress has stalled since 2015 and poverty trends reversed in 2020. A series of shocks—including COVID-19, the 2022 floods, and an economic downturn with record inflation—have reversed previous gains, with poverty reduction stagnating.
Furthermore, Pakistan’s progress in human capital development has significantly lagged due to insufficient human capital investments and shortcomings in the accessibility and quality of public services, with nearly 40 percent of children suffer from stunting.
Geographic inequalities persist as another critical challenge, with rural areas remaining more than twice as poor as urban areas and startling provincial disparities in welfare. These challenges underscore the fragility of earlier progress and the urgent need for decisive policy action.
Past poverty reduction in Pakistan was primarily driven by rising non-agricultural labor income, as more households shifted away from farm work to low-quality service jobs. However, slower and uneven recent structural transformation has hindered diversification, job creation, and inclusive growth. As a result, low productivity across all sectors has constrained income growth.
Such analyses of larger development challenges are only possible taking a long-term analytical lens, which was applied in the Pakistan Poverty, Equity, and Resilience Assessment.
The forthcoming HIES will provide updated information regarding the consumption distribution, and key non-monetary indicators of poverty, and will allow us to expand our analysis based on actual consumption data beyond 2018/19. Conducting household surveys on a regular basis will help reduce uncertainty around future poverty estimation.
What is the difference in national and international poverty rates?
National and international poverty lines serve different purposes and are calculated using fundamentally different methodologies.
The national poverty line reflects Pakistan’s local context—its prices, consumption patterns, and policy priorities—and is used to analyze poverty trends and inform domestic decision-making. It sets a minimum standard of living based on what people need to meet essential food and non-food needs within Pakistan. It remains the relevant benchmark for policymaking in Pakistan.
In contrast, international poverty lines (IPLs) are designed for cross-country comparisons. They convert local spending into a common currency using Purchasing Power Parity (PPP) exchange rates. The World Bank’s IPLs—such as $4.20/day for lower-middle-income countries—offer a global benchmark for comparing poverty across countries. This international threshold is higher than the local threshold which means that more people fall below it, equating to a higher poverty rate.
*The last HIES survey was in 2018/19. The forthcoming HIES survey covers the period 2024/25.