Pakistan’s economy grows 3.9% in second quarter, says PBS

ISLAMABAD: Pakistan’s economy expanded by 3.89% in the second quarter of fiscal year 2025-26, with growth recorded across agriculture, industry and services, according to figures approved on Thursday by the National Accounts Committee (NAC) and released by the Pakistan Bureau of Statistics (PBS).

The PBS said the economy maintained its momentum during the October-December quarter, although growth in agriculture and industry slowed compared with the first quarter of the current fiscal year, while services posted an improved performance.

According to the PBS statement, the agriculture sector grew by 1.8% in the second quarter. The industrial sector expanded by 7.4%, down from 8.9% in the previous quarter, while the services sector grew by 3.7%, higher than in the first quarter.

Questions raised over crop output data

During the NAC meeting, the State Bank of Pakistan’s representative raised questions about the basis for the increase in agricultural output, particularly in the absence of actual crop production data for wheat. The issue was discussed repeatedly, but the PBS did not provide a wheat production figure.

The chief statistician of the PBS told the meeting that actual wheat production could not yet be determined because harvesting had not started in many parts of the country. However, he said a 3.4% increase in wheat cultivation suggested that output was likely to rise.

The NAC noted that cotton production fell because of the impact of floods. Important crops contracted by 1.87% in the second quarter, while other crops declined by 5.7% due to lower green fodder production.

At the same time, livestock growth was recorded at 5.6%, while forestry and fishing grew by 3.8% and 0.8%, respectively.

Industry and services support overall growth

The NAC said the industrial sector grew by 7.4% in the second quarter. Mining and quarrying, however, contracted by 2.5% because of lower production of gas, marble, limestone and other minerals.

Large-scale manufacturing expanded by 5.7%, which the committee attributed to positive contributions from automobiles, transport equipment and petroleum products. The electricity, gas and water supply sector grew by 15.11% due to increased subsidies and a decline in the deflator. Construction growth was estimated at 10.53%, supported by higher production of construction inputs.

In the services sector, overall growth stood at 3.69% during the quarter. Wholesale and retail trade rose by 4.5% on the back of increased marketable supply from domestic agricultural production, manufacturing and imports. Transportation and storage grew by 2.8% due to higher output in road and water transport.

The finance and insurance sector grew by 4.5% despite what the NAC described as a high base. Public administration and social security expanded by 8.7%, education by 4.9%, human health and social work by 5.7%, and other private services by 2.8%.

Growth target remains in focus

For the current fiscal year, the government has set an economic growth target of 4.2%, which it says remains achievable despite the impact of the Middle East conflict. Pakistani authorities have also told the International Monetary Fund that growth is still expected to remain in the 4% to 4.5% range, reflecting continued momentum in the automobile, construction and garment sectors.

According to the government’s assessment shared with the IMF, growth in the next fiscal year may remain on a similar path because of higher fuel prices and weaker external demand. If the conflict is resolved quickly, the implementation of policies aimed at strengthening macroeconomic stability, improving external competitiveness and creating a better business environment for the private sector could help medium-term growth gradually rise to 5.5%, supported by higher investment and exports.

The latest Household Integrated Economic Survey of the Planning Commission, cited in the broader discussion around growth, shows poverty rising to 29%, the highest level in 11 years. It also reported unemployment at a 21-year high of 7.1%, while income inequality rose to a 27-year high.