Improved domestic demand, energy trends, and reforms drive upward revision in economic outlook
Pakistan, MENA See Stronger Growth Than Anticipated in 2025
Economic activity in Pakistan and the Middle East and North Africa (MENA) region has been “stronger than expected” this year, according to the International Monetary Fund (IMF). In its latest Regional Economic Outlook, released Tuesday, the IMF revised its growth forecast for the MENA region to 3.2% in 2025, up from 2.1% in 2024. Growth is expected to reach 3.7% in 2026, reflecting improved economic performance across both oil-exporting and importing nations.
Jihad Azour, IMF Director for the Middle East and Central Asia, said the upward revision is due to a combination of favourable oil market conditions, resilient domestic demand, and positive economic reforms.
Pakistan Gains from Low Energy Prices, Strong Remittances, and Reforms
For Pakistan, the IMF projected economic growth to rise to 3.6% in 2026, supported by ongoing structural reforms, improving financial conditions, and rising investor confidence. Growth in 2025 is also expected to rebound after challenges in previous years, driven by low energy costs, robust remittance inflows, and a recovery in tourism.
While inflation has eased significantly in 2025, thanks to falling food and energy prices, the IMF warns it may rise again in 2026. This potential increase is tied to the phasing out of electricity subsidies and the normalisation of global commodity prices.
Azour emphasised that inflation trends remain mixed across the region. While most MENA countries and Pakistan are seeing slower inflation, Central Asia and some CCA nations continue to face elevated price pressures due to strong domestic demand.
Risks Remain Amid Natural Disasters and Global Uncertainty
Despite the upbeat outlook, the IMF cautioned that the economic recovery is not without risks. For Pakistan, the impact of the severe floods in Q3 2025 could prove more damaging than currently estimated. The IMF noted potential consequences for growth, inflation, and the current account, though the full extent remains uncertain.
Azour concluded by saying that while the overall outlook is positive, both MENA and Pakistan must continue pursuing reforms and macroeconomic stability to maintain momentum and guard against shocks.
