The World Bank’s April 2026 Regional Economic Update for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) region cut its growth outlook for Pakistan-linked economies and flagged severe downside risks from the Strait of Hormuz disruption — placing the World Bank’s FY2026 Pakistan GDP forecast well below the government’s 4.2% target, continuing a pattern in which every major multilateral lender has projected materially lower growth than Islamabad’s own estimates throughout the current fiscal year. Pakistan’s Q2 FY26 GDP growth came in at 3.89% — below the government’s 4.2% full-year target — and analysts warn the Iran war energy shock in Q3 and Q4 will drag the final FY26 number lower still.
| Institution | FY2026 Pakistan GDP Forecast | Report Date |
|---|---|---|
| Government of Pakistan | 4.2% | FY26 Budget, June 2025 |
| IMF | 3.6% | World Economic Outlook, Oct 2025 |
| World Bank (pre-conflict) | 3.1% | Pakistan Development Update, April 2025 |
| World Bank (post-floods) | ~2.6–3.0% | Pakistan Development Update, October 2025 |
| SBP (pre-fuel crisis) | 3.75–4.75% | MPC Statement, Feb 2026 |
| World Bank (post-fuel crisis) | Revised downward | MENAAP Update, April 2026 |
The pre-crisis World Bank forecast of 3.1% was already 1.1 percentage points below the government’s 4.2% target. The April 2026 MENAAP Economic Update — published as the US-Iran war triggered the worst oil supply shock in recorded history — revises this downward further, without yet knowing the full magnitude of the fuel crisis damage to Pakistan’s economic output in Q3-Q4 FY26.
The World Bank cut the MENAAP region’s 2026 growth outlook, noting that the closure of the strategic Strait and destruction of energy and public infrastructure had disrupted markets, increased financial volatility, and weakened the 2026 growth outlook. The report stated: “Risks are firmly tilted to the downside. Uncertainty is pervasive, and the economic outlook could shift significantly if the conflict intensifies or protracts.”
Economic growth in the MENAAP region is expected to slow from 4.0% in 2025 to 1.8% in 2026 — a forecast 2.4 percentage points below the World Bank’s January projections. The conflict also comes as an additional shock to a region already suffering from low productivity growth, limited private sector dynamism and persistent labor market challenges.
Roberta Gatti, World Bank Group Chief Economist for the Middle East, North Africa, Afghanistan and Pakistan, said: “As countries face the heavy toll of the present conflict, it is important to also not lose sight of the work needed for long-lasting peace and prosperity.”
Why Pakistan Is Particularly Exposed
Pakistan sits in a uniquely vulnerable position in the current crisis — more than any other country in the MENAAP grouping:
Experts warned that if the regional conflict persists and oil prices remain around $100 or higher, Pakistan could face a GDP contraction of 1.0 to 1.5%. The most critical threat lies in the external sector, where the country could see a negative impact of $12 to $14 billion over the next year, driven by a 25–30% increase in petroleum imports because of rising oil prices.
Pakistan’s specific exposure channels — not captured in the headline MENAAP number — include: fuel imports costing an estimated $3–4 billion more per year at current Brent prices versus pre-war levels; remittances from 5 million Pakistani workers in Gulf states exposed to labour disruption; freight and logistics cost inflation from Hormuz-related shipping disruptions; and the direct pass-through of diesel prices at Rs 520.35 per litre into inflation, agricultural input costs, and transport fares.
What Pakistan’s Actual Q2 Data Shows — Before the Worst Hit
Pakistan’s economy recorded 3.89% growth in Q2 FY26, supported mainly by stronger industrial and services sector performance. Large-scale manufacturing grew 5.71% in Q2. The State Bank of Pakistan expects GDP to grow at 4% for FY26. The World Bank projection sits below the SBP at 3% by the end of June 2026. However, the government has projected a 4.2% expansion in FY26, a target that appears ambitious.
The Q2 data covers October–December 2025 — before the US-Israel strikes on Iran on 28 February 2026, before diesel hit Rs 520.35/litre, before the Strait of Hormuz disruption, and before Pakistan’s Rs 129 billion fuel subsidy outlay. Q3 and Q4 FY26 GDP data will capture the full economic damage of the energy shock.
The government estimates GDP growth at 4.2% for FY26, with a further increase to 5.1% expected in the next fiscal year. Officials said inflationary pressures have increased due to disruptions in global fuel supply chains following the conflict in the region. GDP is projected to reach Rs 126.9 trillion by June 2026.
The government’s optimism rests on three pillars: strong Q1-Q2 industrial and services sector output; Pakistan Railways’ maintained fare structure; and the diplomatic breakthrough of Pakistan’s Iran-US ceasefire brokerage potentially ending the Hormuz disruption sooner than analysts expect. With Brent crude crashing 15% to $91/barrel on 8 April after the ceasefire, the Q4 damage may be smaller than feared — but still material.
For Pakistan’s private sector, the gap between the government’s 4.2% growth target and the World Bank’s revised outlook directly affects three things. First, FBR’s revenue target of Rs 12,970 billion for FY2026 was built on 4.2% nominal growth assumptions — growth shortfalls mean further revenue misses and tighter fiscal space for FY2027. Second, SBP’s monetary policy path — the PM has directed the Finance Ministry to plan for a policy rate below 10%, currently at 10.5% — depends on inflation returning to target, which the fuel shock makes harder and slower. Third, private investment decisions — from SMEs taking working capital loans to large companies planning expansion capex — price growth risk higher when multilateral forecasts diverge this sharply from government targets.
Pakistan’s economy grew 2.68% in FY2025, recovering from a 0.6% contraction in FY2023. The World Bank’s Pakistan Development Update: Reimagining a Digital Pakistan (April 2025) projected FY26 growth at 3.1% — a forecast it had been downgrading for four consecutive reports. The IMF’s current $7 billion EFF programme for Pakistan, with the third review staff-level agreement concluded 28 March 2026, embeds structural benchmarks including a primary fiscal surplus of 1.6% of GDP — a target that becomes harder to hit when GDP growth disappoints.