Modeling Lab’s Quarterly Economic Report Featured in Business Recorder

The Lahore School of Economics’ Modeling Lab is pleased to share that its latest quarterly publication, State of the Pakistan Economy: Growth and Inflation in FY 2025-26 (Q1), has been featured in Business Recorder. The report provides updated GDP growth estimates for fiscal year 2025-26 and analyzes the macroeconomic factors shaping Pakistan’s economic outlook. The Lab projects GDP growth at 2.4 percent, reflecting pressures from a reversal in the Current Account, which shifted from a surplus last year to a 0.6 billion dollar deficit in the first quarter. If external conditions improve, growth could rise to 2.9 percent, moving closer to projections by major international institutions.

The report highlights several important sectoral trends. Large Scale Manufacturing has returned to positive growth after three years of contraction, while agriculture continues to perform below trend, partly due to the removal of long-standing crop support prices. Although this policy has contributed to lower inflation, it has also weighed on agricultural output. The Modeling Lab estimates inflation for FY 2025-26 at 7.1 percent, supported by exchange rate stabilization after several years of depreciation, though rising energy taxes remain a significant contributor.

With global trade facing increasing uncertainty and Pakistan’s exports, particularly textiles, showing limited responsiveness to currency depreciation, the report emphasizes the need to rethink traditional export-led growth strategies. The Modeling Lab proposes a shift toward liberalizing imports of investment goods to stimulate long-term growth, balanced by reducing non-essential consumer imports to maintain Current Account sustainability. The Lab is pleased to see its research contributing to national economic discussions and appreciates Business Recorder for featuring its work.