Farooq Awan

Easing global inflation and falling commodity prices are emerging as important stabilising factors for Pakistan’s economy, offering the prospect of reduced import costs and lower price pressures in the coming months. Softer food and energy prices, combined with steady global output growth, have helped improve the international environment as the world heads into 2026.

According to the Monthly Economic Update and Outlook for November 2025, global economic activity remains resilient despite geopolitical and trade-related headwinds. Citing the Fitch Global Economic Outlook 3Q25, the report states that world GDP growth is projected at 2.4 percent in 2025 and 2.3 percent in 2026. China is expected to grow by 4.7 percent next year, while the U.S., U.K. and Eurozone are projected to expand between 1.1 percent and 1.6 percent.

The J.P. Morgan Global Composite Output Index also showed strengthening momentum, rising to 52.9 points in October, reflecting expansion across both manufacturing and services. However, global trade conditions and business confidence remain fragile.

More importantly for Pakistan, several crucial international commodity indices recorded notable declines. The report notes that the energy price index fell by 3.7 percent in October, while the agricultural price index dropped by 1.9 percent. Food prices decreased by 0.8 percent, beverages by 5.6 percent and raw materials by 1.2 percent. Fertiliser prices, a key input for Pakistan’s agriculture sector, fell sharply by 6.6 percent, though metal prices increased by 5.5 percent.

The FAO Food Price Index averaged 126.4 points in October, down from 128.5 in September and significantly below its March 2022 peak. Lower international prices of cereals, dairy, meat and sugar were the main contributors to the decline.

The World Bank’s Commodity Markets Outlook for October 2025 further projects that global commodity prices will fall by 7 percent in 2025 and another 7 percent in 2026, supported by subdued global growth, adequate oil supply and stable agricultural output. Precious metals, however, may rise further due to investment-driven demand.

For Pakistan—where energy, food and industrial raw material imports form a substantial share of total imports—these global declines could help moderate inflation, stabilise the exchange rate and ease pressure on the current account. The report confirms that “global inflationary pressures eased” as input costs fell to their lowest levels of the year.

Pakistan’s major export markets, including the U.S., U.K., Eurozone and China, are also operating near their potential levels, indicating stable external demand for textiles and manufactured goods.

Economists believe that if global price softness persists, Pakistan could benefit through a lower import bill and improved inflation management. However, risks remain from geopolitical disruptions, global energy market shocks and potential supply chain bottlenecks.

The report concludes that the global environment is broadly supportive of Pakistan’s stabilisation efforts, provided domestic reforms continue and external risks are effectively managed.

Credit: INP-WealthPk