By Farooq Awan

Pakistan’s near-term economic outlook remains cautiously optimistic despite emerging global and regional risks, with inflation projected to remain within the range of 7.5 to 8.5 percent in March 2026, according to the Monthly Economic Update & Outlook released by the Finance Division.

The outlook reflects improving momentum in key sectors of the economy, supported by industrial activity, steady inflows and ongoing policy measures.

Recent data indicates continued recovery in the industrial sector, with higher imports of textile machinery as well as transport and construction-related inputs expected to translate into increased domestic production activity.

At the same time, the report highlights that global developments may pose risks to the outlook. Rising oil prices and potential supply chain disruptions are expected to increase input costs for industries, which could affect production and inflation dynamics.

To address these challenges, the government has undertaken measures to manage energy demand and maintain adequate petroleum reserves, while adhering to fiscal austerity to support economic stability.

On the external front, remittances are expected to remain strong, particularly due to increased inflows associated with the Eid season. These inflows are likely to continue supporting the external account, although their trajectory will depend on economic conditions in host countries.

The report also highlights the continued contribution of IT exports, which are providing additional support to foreign exchange earnings and strengthening the services sector. Despite external pressures, the current account deficit is expected to remain manageable in the near term, supported by steady inflows and controlled external imbalances.

The outlook also notes that the economy is better positioned to absorb external shocks compared to previous periods, reflecting improvements in key macroeconomic indicators. At the same time, rising global oil prices remain a key risk, as they could increase the import bill and exert pressure on inflation.

Overall, the economic outlook suggests continued stability and moderate growth, supported by stronger industrial activity, steady inflows, and ongoing policy measures, while recognizing downside risks stemming from global uncertainties.

Credit: INP-WealthPk