Strong start to the new fiscal year
Pakistan’s economy has started the fiscal year 2025–26 on a stronger footing, with gross domestic product (GDP) growing by 3.71 percent in the first quarter. Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal shared the latest figures on social media platform X, describing the outcome as a clear improvement over the same period last year.
He pointed out that the first-quarter growth rate is 2.15 percentage points higher than the comparable quarter of FY25, calling it a qualitative shift in Pakistan’s economic trajectory. For policymakers, the numbers offer early signs that stabilisation measures and structural adjustments may be starting to translate into stronger real-sector performance.
While one quarter does not define an entire year, a 3.71 percent start gives the government some breathing space as it continues to implement reforms and manage external and fiscal pressures.
Industrial sector leads the recovery
According to the minister, the main driver of the improvement has been the industrial sector. Industrial output expanded by 9.38 percent in the first quarter of FY26, compared to just 0.12 percent in the same quarter last year. This marks a sharp turnaround from the stagnation and contraction seen in previous years.
Higher industrial growth typically reflects rising activity in manufacturing, construction and allied sectors, which in turn support jobs, supply chains and exports. Even a moderate revival in large-scale manufacturing can have a broad impact on the wider economy, from transport and logistics to wholesale and retail trade.
A stronger industrial base also improves the tax outlook, as more formal-sector firms resume production, increase capacity utilisation and potentially invest in new projects. This can support government revenues without relying only on new taxes or higher rates.
From uneven growth in FY25 to a more stable start in FY26
Ahsan Iqbal contrasted the current performance with the pattern seen in FY25, when quarterly growth remained uneven. GDP expanded by 1.56 percent in the first quarter of FY25, 2.03 percent in the second, 2.66 percent in the third and 6.17 percent in the fourth quarter.
That profile suggested a late surge in activity after a sluggish start, driven in part by base effects and short-term rebounds. By comparison, FY26 has opened with growth that is more than double that of the same quarter last year, giving the government hope that the current year could follow a more stable and balanced path.
Economists will now be watching the next few quarters to see whether the early momentum can be sustained or whether external shocks and domestic constraints slow the pace again. Consistency across quarters will be key for building confidence among investors and businesses.
Growth achieved despite major economic headwinds
The minister highlighted that the economic rebound has come despite a challenging backdrop. Pakistan is still recovering from the flood shock of 2025, which damaged infrastructure, disrupted crops and strained public finances. At the same time, the government has been implementing fiscal tightening measures and reducing energy subsidies as part of its reform commitments.
These steps, while necessary for macroeconomic stability, have put pressure on households and businesses through higher utility costs and reduced public spending space. Rising food inflation has also squeezed purchasing power, especially for low- and middle-income families.
In this context, a 3.71 percent growth rate is being presented by the government as evidence of growing resilience in the economy. It suggests that some sectors are able to adjust to higher costs and policy changes, even as others continue to struggle.
What the Q1 GDP figures mean for the outlook
The latest GDP figures will likely be used by policymakers to argue that stabilisation and reform efforts are starting to pay off. A stronger industrial performance, combined with steady services and recovering agriculture, could lay the foundation for more balanced growth if supported by investment and export gains.
However, challenges remain. Sustaining growth will depend on keeping inflation in check, managing external debt obligations, maintaining a stable exchange rate and ensuring that energy and input costs do not rise to levels that choke off production.
For businesses and investors, the early signs of recovery are positive but will need confirmation over the next few quarters. For citizens, the real test will be whether headline growth translates into more jobs, better wages and greater relief from the cost-of-living pressures that have built up in recent years.
If the government can combine macroeconomic discipline with targeted support for productive sectors and vulnerable households, the 3.71 percent growth in Q1 FY26 could mark the start of a more durable turnaround for Pakistan’s economy.
