ISLAMABAD, Oct 27 (Wealth Pakistan) – Pakistan’s economic outlook stands to gain from easing global inflation and declining commodity prices, though weaker external demand and elevated global interest rates may challenge export growth and foreign investment, according to the Finance Division’s Monthly Economic Update & Outlook (October 2025).
Global trends and economic outlook
The report said that declining international energy and food prices are likely to ease Pakistan’s import bill, stabilize inflation, and strengthen the external account. However, slower global growth—projected at 3.2 percent for 2025 and 3.1 percent for 2026—may limit export expansion, especially in textiles and manufactured goods.
The global economy continues to recover unevenly. Advanced economies are expected to grow modestly by 1.6 percent, while emerging markets maintain stronger momentum led by Asia. China’s economy is projected to expand by 4.8 percent in 2025 and 4.2 percent in 2026, India by 6.3 percent, and the United States by around 2 percent.
For Pakistan, this scenario presents both opportunities and risks. Reduced imported inflation will support monetary stability and improve household purchasing power. Yet, softening demand in key export markets such as the European Union, the United States, and the United Kingdom could weigh on external earnings.
Commodity and energy price movements
“The moderation in energy and commodity prices will ease pressure on the current account and support domestic price stability,” the Finance Division noted. “However, the pace of export recovery will depend on global consumption patterns and trade policy dynamics.”
Economists said that stabilization in global oil prices, along with falling freight rates, would provide Pakistan a fiscal and external cushion. A Karachi-based economist noted that steady oil markets and lower logistics costs could significantly reduce import expenses.
The report showed that metal prices rose 2.9 percent in September, while agricultural commodities declined 1.3 percent due to better global supplies. Energy prices dropped 0.5 percent, a positive sign for Pakistan, where energy imports make up more than a quarter of total imports.
Financial implications and risks
The Finance Division added that lower global inflation could help reduce external borrowing costs for developing countries. As inflation eases in major economies, interest rates are likely to stabilize, improving financing access for emerging markets.
However, risks persist due to geopolitical tensions, climate-related shocks, and restrictive trade policies. Elevated public debt levels in advanced economies, particularly in the United States and Europe, may sustain tighter financial conditions, limiting capital flows to developing nations.
“The risk of renewed volatility in commodity and energy markets remains significant,” the Finance Division warned. “Supply-chain disruptions linked to conflicts or climate events could trigger new inflationary waves.”
Remittances and domestic stability
Despite external challenges, global remittance flows are expected to grow 2.4 percent in 2025, driven by strong labor demand in Gulf Cooperation Council (GCC) countries and recovering European economies. This will support Pakistan’s remittance growth, which reached 9.5 billion dollars in the first quarter of FY2026.
Economists said sustained overseas employment would continue to stabilize Pakistan’s external position. They added that remittances serve as a buffer against trade imbalances and strengthen household consumption.
Policy direction and reform priorities
Inflation in advanced economies has declined from 6.9 percent in 2023 to 4.2 percent in 2025 and is projected to fall further to 3.7 percent in 2026. This global moderation, the report said, will aid Pakistan’s disinflation efforts as stable commodity prices filter into domestic markets.
Even so, slower global trade growth could constrain Pakistan’s export performance. The Finance Division emphasized that diversifying export markets and investing in value-added industries are essential to sustaining growth.
It added that maintaining fiscal prudence, structural reforms, and policy continuity would allow Pakistan to benefit from global price stability. “This phase of global moderation presents an opportunity for Pakistan to consolidate macroeconomic stability and strengthen resilience against external shocks,” the report concluded.
The Finance Division underscored that effective exchange-rate management, trade competitiveness, and prudent external financing will be critical to turning global economic stability into lasting domestic gains.