KARACHI: Pakistan GDP growth picked up momentum at the start of FY26, as the country recorded a 3.7 percent year-on-year expansion in GDP during 1QFY26, according to new estimates released by the National Accounts Committee (NAC). The performance marks the strongest first-quarter growth in four years and exceeds the eight-year average of 3.3 percent, indicating a visible shift in overall economic momentum.
Analysts say the rebound in Pakistan GDP growth reflects improving industrial activity, easing cost pressures, and a gradual return of investor confidence across key sectors of the economy.
Also with the optimistic quarterly data, the committee has marginally increased FY25 growth by 0.09 per cent, and full-year FY26 GDP forecasts have risen by 3.5-4.0% which reflects an increased confidence, especially in industrial activity.
Industry Leads the Revival
The most impressive aspect of the 1QFY26 figures is the impressive growth of the industrial sector at an unprecedented 9.4% growth in the first quarter since 1Q of 2008. This is a drastic reversal compared to a virtually flat performance a year back and was majorly due to the 25.5% increase in electricity, gas and water supply, which was backed with higher subsidies and reduction in price pressures.
Construction activity was also providing an emphatic push, with construction activity surging more than 21% based on strengthened cement production and enhanced on-ground construction. In the meantime, large-scale manufacturing (LSM) registered a small yet promising increase of 3.9% also contributing to the output of industry.
Due to the power of these trends, the growth forecasts of the industry in FY26 have been downgraded drastically to 6.8 as opposed to the previously recorded 3.7. The projection of construction growth has also been increased to 12 which is an indication of improved cement offtake and sustained demand.
Agriculture Shows Strength in Crop Pressure.
Agriculture sector experienced an increase of 2.9% in 1QFY26 and was able to remain positive despite the decline in crop production. Declines of cotton had a weight on the significant crops and other crops also registered a significant decline.
Nevertheless, the livestock development exceeding 6% and the constant increase of forestry resulted in the correction of the weak crop, preserving the overall agricultural performance. Authorities are still holding a 3% growth in agriculture target in FY26, relying on slower recovery in crops and the continued robust livestock.
Services Middle Ground Growth.
Services increased 2.35 percentage in the quarter with growth in finance and insurance in the double digits and a healthy growth in the field of public administration and social security. These profits were in part discounted by a plummeting information and communication, associated with the decreased production of mobile phones. Nevertheless, the services growth outlooks are stable in FY26, approximately 3%.
Outlook Turns Brighter
As the industrial activity has intensified, and construction has started gaining momentum, the general economic picture regarding FY26 is better. The positive growth of GDP forecast of 3.5-4.0 per cent has been revised upwards as expectations are that in the months to come industry-led growth would further stimulate the recovery of the economy in general, as long as macroeconomic stability does not disappear.
With industry gaining traction and construction activity accelerating, Pakistan GDP growth is expected to strengthen further in FY26, provided macroeconomic stability remains intact.
