Fitch sees Pakistan GDP growth reaching 3.5% by 2027

Fitch Ratings has forecast that economy of Pakistan will strengthen gradually, with real GDP growth expected to rise from 2.5% in 2024 to 3.5% by 2027. The agency linked the improvement to easing inflation, lower interest rates, and steady progress on fiscal reforms.

Inflation has sharply declined from a peak of 38% in May 2023 to 4.1% in July 2025, and Fitch expects it to average around 5% this year. The central bank’s decision to halve its policy rate since mid-2024 to 11%, alongside currency stability and a healthier current account, has added momentum to the recovery.

Fitch said Pakistani banks were positioned to benefit from better lending opportunities as credit demand grows. The banking sector’s impaired loan ratio improved to 7.1% by March 2025 from 7.6% in late 2023, supported by robust loan growth and lower pressures on asset quality.

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The agency upgraded Pakistan’s sovereign rating to ‘B-’/Stable in April, citing economic recovery and fiscal consolidation. Moody’s also raised Pakistan’s credit rating to Caa1 earlier this year, improving investor sentiment.

While Fitch expects banks to see margin pressure as interest rates adjust, stronger loan activity and treasury income should sustain earnings. The system’s capital adequacy ratio hit a decade-high of 21% in March, reflecting strong resilience.

However, Fitch cautioned that banks remain exposed to sovereign risks due to large holdings of state securities and loans to public entities.