Pakistan among vulnerable economies as rising energy costs, supply chain disruptions and global uncertainty threaten economic stability

Islamabad: The Asian Development Bank (ADB) has lowered its economic growth forecast for developing Asia and the Pacific for 2026, warning that prolonged disruptions in global energy markets and rising inflationary pressures could slow economic recovery across the region.

According to the July 2026 Asian Development Outlook, ADB has revised down the region’s 2026 growth projection to 4.9 percent, compared with the earlier estimate of 5.1 percent issued in April. Developing Asia recorded growth of 5.5 percent in 2025.

The bank attributed the downward revision largely to continued disruptions in global energy markets caused by geopolitical tensions, particularly the conflict in the Middle East, which has pushed up energy costs, affected supply chains and increased uncertainty for businesses and governments.

While ADB maintained its 2027 growth forecast at 5.1 percent, it warned that any renewed escalation in geopolitical tensions could further disrupt energy markets and intensify inflationary pressures.

Pakistan Faces Energy and Inflation Risks

Although Pakistan’s economy was not singled out separately in the report, the broader risks highlighted by ADB carry significant implications for the country, which remains heavily dependent on imported energy to meet domestic demand.

Higher global oil and gas prices could increase Pakistan’s import bill, widen pressure on foreign exchange reserves and complicate efforts to maintain economic stability. Rising fuel costs could also affect electricity generation costs, transportation expenses and overall inflation.

Pakistan’s industries, particularly energy-intensive sectors such as textiles, manufacturing, fertilizers and agriculture, could face additional pressure if global energy prices remain elevated.

The increase in fertilizer and raw material costs highlighted by ADB is also a concern for Pakistan’s agriculture sector, where higher input prices can directly affect farmers’ production costs and food prices for consumers.

Inflation Pressure May Increase

ADB projected inflation in developing Asia and the Pacific to rise to 4.3 percent in 2026, compared with 3 percent in 2025.

For Pakistan, where inflation has remained a major economic challenge in recent years, renewed pressure from energy prices, imported goods and supply chain disruptions could slow progress toward price stability.

Economists warn that higher global commodity prices often transmit quickly into domestic markets, particularly in countries dependent on imports for energy and industrial inputs.

ADB Calls for Balanced Economic Policies

ADB Chief Economist Albert Park said sustained implementation of the framework agreement could help restore stability in global energy markets, although uncertainty and downside risks remain.

He said developing Asia and the Pacific continue to demonstrate resilience, but governments need to balance policies aimed at supporting economic growth while controlling inflation.

For Pakistan, maintaining this balance will remain critical as policymakers attempt to attract investment, support industrial growth and manage external economic pressures.

Regional Growth Outlook Revised Downward

ADB said growth forecasts for most Asian subregions have been reduced for 2026, except developing East Asia.

China’s growth projections remain unchanged at 4.6 percent for 2026 and 4.5 percent for 2027, supported by exports and infrastructure investment.

India’s 2026 growth forecast was lowered to 6.6 percent, mainly due to the impact of higher energy prices on domestic demand, while the 2027 projection remains at 7.3 percent.

Growth forecasts for Southeast Asia and the Pacific were also revised downward due to weaker domestic demand, slower tourism activity, rising inflation and higher import costs.

With global energy markets facing continued uncertainty, Pakistan and other developing economies in Asia are expected to remain exposed to external shocks, making energy security, supply chain resilience and inflation management key policy priorities.

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