National Accounts Committee reports four-year-high annual GDP growth, but a sharp industrial contraction drags fourth-quarter expansion to a six-quarter low of 2%.
Pakistan’s economy expanded by 3.65% in fiscal year 2025-26 (FY26), marking its highest growth in four years, although a sharp slowdown in the final quarter highlighted persistent weaknesses in key sectors, particularly industry.
According to a report by Topline Securities Limited, the National Accounts Committee (NAC) released gross domestic product (GDP) estimates for the fourth quarter of FY26, showing year-on-year growth of 2.0%. This brought full-year economic growth to 3.65%, broadly in line with market expectations.
However, the outturn fell slightly short of the State Bank of Pakistan’s (SBP) projected growth range of 3.75% to 4.75% and the government’s revised estimate of 3.7%.
The NAC also revised down GDP growth for FY25 to 3.11% from the previously reported 3.18%, primarily due to a downward revision in agricultural growth to 1.32% from 1.53%.
Fourth-quarter growth hits six-quarter low
Economic momentum weakened considerably in the final quarter of FY26, with GDP growth slowing to 2.0%, its lowest level in six quarters. The performance was also significantly below the average growth of 4.21% recorded over the preceding three quarters.
The industrial sector was the principal drag on quarterly performance, contracting by 4.7% despite growth in manufacturing activities. Electricity, water and gas (EWG) recorded a steep decline, reflecting a high base effect from the corresponding period last year.
The EWG segment contracted by approximately 33% year on year in the fourth quarter, following extraordinary growth of 123% in the same period of FY25. That earlier surge was attributed to adjustments relating to solar energy data in the calculation methodology.
Agriculture sector expands by 3.5%
Agriculture recorded growth of 3.5% during FY26, supported by a 1.59% increase in important crops and 4.3% growth in other crops.
In the fourth quarter, agricultural output increased by 3.7% year on year. Forestry led the performance with growth of 15%, while important crops and other crops expanded by 2.2% and 2.6%, respectively.
The sector’s performance provided support to overall economic growth despite challenges in other areas of the economy.
Industrial growth reaches 3.34% in FY26
The industrial sector grew by 3.34% during FY26, supported by a 6% increase in overall manufacturing activity across large-scale manufacturing, small-scale manufacturing and slaughtering.
Construction also delivered a positive performance, expanding by 6.3% during the fiscal year. However, the annual contraction in the EWG segment, which stood at 10.2%, offset some of these gains.
In the fourth quarter, small-scale manufacturing led the industrial sub-sectors with growth of 9.5%, followed by mining and quarrying, which expanded by 8.9%. The sharp contraction in EWG remained a major weakness.
Economic outlook remains challenging
Pakistan’s 3.65% GDP growth in FY26 represents an improvement in annual economic performance, but the fourth-quarter slowdown raises questions about the sustainability of the recovery.
The divergence between full-year growth and the weaker final-quarter outturn highlights the uneven nature of economic expansion. While agriculture, manufacturing and construction provided support, the contraction in industry during the final quarter demonstrated that momentum remained fragile.
The latest estimates underline the importance of strengthening industrial activity and sustaining growth across productive sectors to maintain economic recovery in the coming fiscal year.