IMF projects Pakistan’s inflation at 9.9% in FY27, keeps growth forecast at 3.5%

• Pakistan’s inflation is projected to rise to 9.9% in FY2026-27 from 7.1% in the preceding fiscal year.
• The IMF retained its GDP growth forecast at 3.5%, while unemployment is expected to fall to 6.5%.
• Global growth is forecast at 3.1% in 2026 as AI investment helps offset pressures from conflict and higher energy prices.

The International Monetary Fund has projected Pakistan’s inflation rate at 9.9% for the 2026-27 fiscal year, up from 7.1% in the previous year, while leaving its economic growth forecast unchanged at 3.5%.

The projections, included in the World Economic Outlook released on Tuesday, point to rising price pressures alongside moderate economic expansion.

The report put Pakistan’s estimated growth in 2025 at 3.6%. It also forecast a decline in unemployment to 6.5% in FY2026-27, compared with 6.9% in the preceding fiscal year.

Pakistan’s current account deficit is expected to reach 1% of GDP in the current fiscal year. The report said its projection for 2026 remained unchanged.

The anticipated increase in inflation could further squeeze household purchasing power, particularly among lower- and middle-income families that devote much of their earnings to food, transport, housing and utilities.

Businesses could also face higher production, transportation and financing costs, affecting investment decisions and consumer demand. Persistent price pressures would add to the challenge of supporting growth and employment while determining the appropriate course for interest rates.

Globally, the IMF forecast economic growth of 3.1% in 2026, slightly above its July estimate of 3%, despite risks associated with the Middle East conflict and elevated energy prices.

Growth is expected to strengthen to 3.4% in 2027. That forecast was unchanged from July but stood 0.2 percentage points above the lender’s April projection.

The report said investment in artificial intelligence infrastructure was helping cushion the impact of the energy shock and geopolitical uncertainty. However, it warned that a prolonged Middle East conflict, renewed inflation, deteriorating fiscal conditions and uncertain returns on AI spending could undermine that support.

IMF chief economist Silvana Tenreyro said the global economy had shown resilience but was coming under increasing strain, with risks weighted towards weaker growth. She warned that an extended conflict in the Middle East could intensify inflation and slow economic activity.

For the United States, the IMF projected growth of 2.3% in both 2026 and 2027. Private consumption, tax cuts and AI investment are expected to support the economy, although imports linked to that investment could offset some of the gains.

The eurozone’s 2026 growth forecast was raised to 1.1% from 0.9% in July, reflecting stronger AI-related investment and increased defence spending.

Britain’s growth forecast for 2026 was increased by 0.3 percentage points to 1.3%, also supported by greater investment in AI.

China is expected to grow by 4.5% in 2026 and 4% in 2027. Both estimates were lowered by 0.1 percentage points from July, as higher oil prices compounded concerns over weak domestic demand.

India is projected to remain the fastest-growing major economy, with expansion of 7% in both years. The IMF identified strong domestic demand, services activity and AI investment as drivers of that growth.

The lender said countries developing AI platforms or supplying the hardware needed for them were benefiting from the infrastructure investment boom. It nevertheless cautioned that disappointing returns or a sharp slowdown in spending could create economic risks.

Under a scenario of faster AI adoption and stronger investment, global GDP could be an additional 0.6% higher by 2029, with the largest gains expected in the United States and China.

Global headline consumer price inflation is forecast at 4.7% in 2026 before easing to 4.1% in 2027. The IMF warned that energy shocks, geopolitical tensions, fiscal pressures and extreme weather could weaken the outlook.