KARACHI: Pakistan’s economy is likely to maintain its positive momentum in the coming months, supported by industrial expansion, improved governance and prudent macroeconomic management, according to the Finance Ministry’s Monthly Economic Update and Outlook for December 2025.
The report said the economic outlook remains favourable, driven by sustained growth in industrial activity and continued momentum in key sectors such as textiles, automobiles, cement and food processing.
Gross domestic product (GDP) grew by 3.71 percent in the first quarter of fiscal year 2026, led by a robust 9.38 percent expansion in industry. Agriculture grew by 2.89 percent, while the services sector recorded growth of 2.35 percent.
High-frequency indicators pointed to a continuing recovery, with large-scale manufacturing (LSM) posting 5.02 percent growth during July–October and accelerating to 8.3 percent year-on-year in October. Major industries, including textiles, automobiles, cement, food and petroleum products, showed positive trends, while car production surged 65 percent during the first five months of the fiscal year.
Inflation eased slightly in November, with consumer prices rising 6.1 percent year-on-year compared to 6.2 percent in October. The government expects inflation to remain moderate in the range of 5.5 to 6.5 percent in December, largely due to base effects.
The easing inflationary trend allowed the State Bank of Pakistan to cut the policy rate by 50 basis points to 10.5 percent in December, supporting credit growth and investor confidence.
On the external front, the current account posted a surplus of $100 million in November, although a cumulative deficit of $812 million was recorded during July–November as imports outpaced exports. Goods imports rose 11.1 percent to $25.6 billion, while exports declined 3.2 percent to $12.8 billion. Services exports, led by information technology, increased by 16.7 percent.
Workers’ remittances remained a key support, rising 9.3 percent to $16.1 billion during the first five months of the fiscal year. Foreign exchange reserves increased to $21 billion by December 19, the highest level since March 2022, supported by inflows from the International Monetary Fund following a successful programme review.
Fiscal performance also improved, with better revenue mobilisation and spending discipline resulting in a consolidated fiscal surplus of 1.0 percent of GDP during July–October, compared to 0.4 percent in the same period last year. Federal tax revenues grew 10.2 percent during July–November, driven mainly by direct taxes and federal excise duty.
Agriculture showed encouraging signs ahead of the Rabi season, as agricultural credit disbursements rose 18.6 percent and imports of farm machinery increased by more than 27 percent. The government is targeting wheat production of nearly 30 million tonnes.
The Finance Division said the overall economic outlook remains positive, supported by industrial recovery, steady remittance inflows and fiscal consolidation. While risks persist from rising import demand and global uncertainties, macroeconomic stability is expected to underpin growth in the months ahead.
