Oil spike threatens Pakistan’s economic growth

Topline Securities Ltd released its latest “Pakistan Strategy” report on Saturday, analysing the impact of soaring oil prices amid regional tensions and their implications for Pakistan’s economy and stock market. The brokerage said the situation is prolonged and evolving, with outcomes hinging on whether the conflict ends or a peaceful resolution is reached. The report projected that if current conditions persist, Pakistan’s inflation over the next 12 months could average 9-10 per cent, with fourth-quarter FY26 inflation surpassing 11pc. These forecasts are based on an oil price of $100 per barrel, with every $10 increase adding roughly 50 basis points to inflation estimates. At $120 per barrel, average annual inflation could reach 10-11pc, prompting the State Bank of Pakistan to consider further policy rate hikes to protect real returns. Rising energy costs and inflation are expected to weigh heavily on economic growth. Topline Securities lowered its GDP forecast for FY27 to 2.5-3.0pc, down from an earlier 4.0pc, reflecting a 100-120bps impact. FY26 growth is maintained at 3.5-4.0pc, in line with the central bank’s revised guidelines. Industrial growth could fall to 1pc from 3.9pc, agriculture to 4.0pc from 4.4pc, and services to 2.8pc from 4.0pc if the conflict continues. By contrast, if tensions ease by FY27, growth could stabilise around 3.5-4.0pc. Fiscal outlook Analysts at Topline Securities expect the current account deficit (CAD) for FY27 to remain below $3.5 billion (0.8pc of GDP) with administrative measures. However, slippages or lax import controls could push it above $8bn (1.9pc of G