ISLAMABAD: Pakistan’s manufacturing sector has staged a strong recovery, with large-scale manufacturing (LSM) expanding by 6.1 per cent in FY2026 after contracting by 9.8 per cent in FY2023, according to the Pakistan Economic Survey 2025-26.
The turnaround marks one of the most significant improvements in the country’s industrial sector and signals renewed momentum in economic activity after a period marked by high inflation, import restrictions and slowing production.
Large-scale manufacturing is widely regarded as a key indicator of industrial health because it covers major sectors including textiles, food processing, automobiles, pharmaceuticals, chemicals, cement and engineering products.
The latest figures suggest that manufacturing activity has regained strength as economic conditions improved. Overall industrial growth reached 3.5 per cent in FY2026, compared with a contraction of 3.9 per cent in FY2023.
The recovery comes alongside broader improvements across the economy. GDP growth rose to 3.7 per cent after the economy contracted by 0.2 per cent three years ago, while the size of the economy reached a record US$452.1 billion.
Economic stabilisation has also supported industrial expansion. Inflation fell sharply to 6.7 per cent from 29.2 per cent in FY2023, helping reduce cost pressures on manufacturers and businesses. Foreign exchange reserves climbed to US$17.2 billion, easing concerns over external financing and imports of industrial inputs.
The Economic Survey also showed growing confidence among businesses. Private-sector credit increased by 22 per cent year-on-year, indicating stronger investment activity and greater access to financing. More than 39,000 new companies were registered during the year, reflecting expanding entrepreneurial activity.
Officials say continued reforms in taxation, energy, state-owned enterprises and investment facilitation are creating a more supportive environment for industrial growth. The strong rebound in manufacturing is expected to play a key role in sustaining economic recovery and supporting job creation in the coming years.
