Pakistan GDP Growth Slows Sharply on Hormuz Energy Crisis

The Middle East crisis is threatening Pakistan’s tentative recovery from the brink with the help of the International Monetary Fund (IMF), as soaring energy prices and the lack of regular liquefied natural gas supply from Qatar dragged growth in gross domestic product well below analyst estimates.

According to OilPrice, Pakistan’s economy grew by 2.0% in the quarter ended June, representing the fourth quarter of its fiscal year 2026, based on official data released by the Pakistan Bureau of Statistics. The growth rate was more than twice as slow compared to the 4.42% expansion recorded in January-March, falling short of the 3.5% growth expected in a Bloomberg survey of economists.

Industrial Contraction and Budget Pressure

For the full fiscal year 2026 ended June, Pakistan now expects its GDP growth rate at 3.65%, down slightly from 3.70% estimated previously. While the economy fared well overall during the fiscal year, the April-June slowdown highlighted how the ongoing energy crisis is hitting industry and straining Pakistan’s budget framework as costs to procure gas and fuels spiral higher.

Industry contracted by 4.7% in the fourth quarter of fiscal year 2026, while agriculture and services both grew by more than 3.5%. Pakistan faces challenging winter months ahead with potential natural gas shortages as Qatari and UAE liquefied natural gas flows from the Strait of Hormuz remain severely disrupted.

Key facts

• Pakistan GDP growth slowed to 2.0% in the quarter ended June, down from 4.42% in January-March.
• Full fiscal year 2026 GDP growth is now projected at 3.65%, compared to 3.70% previously.
• Industry contracted by 4.7% in the fourth quarter due to soaring energy costs and disrupted traffic at the Strait of Hormuz.
• Pakistan sourced 99% of its LNG imports from Qatar under term contracts last year, but faces rising spot purchase costs exceeding $1 billion.