The International Monetary Fund (IMF) has revised Pakistan’s GDP growth projection downward to 2.6% for the current fiscal year, citing the negative impact of record-high U.S. tariffs and rising global trade tensions.
The updated forecast comes shortly after U.S. President Donald Trump announced sweeping tariffs affecting most trading partners, including a 29% duty on Pakistani exports. These protectionist measures have triggered concern about Pakistan’s export sector, with economists warning of short-term disruption and long-term structural challenges.
Previously, the IMF had projected Pakistan’s growth at 3% in January, which was itself a downgrade from 3.2%.
The Pakistan Institute of Development Economics (PIDE) warned that the new tariffs could lead to macroeconomic instability, job losses, and reduced foreign exchange earnings. It urged diversification in trade and exports as a response to the shifting global economic landscape.
The IMF also adjusted inflation projections for Pakistan, estimating 5.1% for the current year and 7.7% for the next fiscal year.
Global Outlook Also Slows
The IMF trimmed its global growth forecast for 2025 by 0.5 percentage points to 2.8%, blaming escalating trade tensions and policy uncertainty. Global inflation is also expected to ease more slowly than previously anticipated, reaching 4.3% in 2025 and 3.6% in 2026.
“This marks a reset of the global economic system that has governed the past 80 years,” said IMF Chief Economist Pierre-Olivier Gourinchas. He warned that continued tariff escalation could lead to market volatility, tightened financial conditions, and broader economic slowdown.
Growth forecasts were cut across major regions:
- Eurozone: Now expected to grow 0.8% in 2025 and 1.2% in 2026
- Germany: Revised down to 0% in 2025
- UK: Growth lowered to 1.1% in 2025
- Japan: Forecast reduced to 0.6% in 2025
- China: Growth trimmed to 4%, with an estimated 1.3 percentage point impact from tariffs despite fiscal stimulus
The IMF also slashed global trade growth expectations to 1.7% in 2025, nearly half the pace of 2024, highlighting the cost of growing economic fragmentation.
“Trade will continue, but it will be more expensive and less efficient,” Gourinchas noted, emphasizing the urgent need to restore stability and predictability in global trade systems.
