Pakistan Economy Grows Amid Iran War While Fitch Downgrades Bangladesh Outlook

Pakistan's economy posted accelerated growth in the final quarter of the past fiscal year, defying headwinds from the ongoing Iran war that has driven up global crude prices. The nation, which relies heavily on imported fuel, saw its expansion quicken even as the conflict introduces significant risks to its outlook, according to Bloomberg Economics reports.

This positive momentum comes amid a mixed global response to the Middle East tensions. While Pakistan's growth figures highlight domestic resilience—potentially bolstered by recent reforms and stabilizing inflation—the surge in oil prices threatens to inflate import costs and strain the country's external balances. Economists note that higher energy expenses could erode recent gains if the war persists, affecting households and industries alike.

In contrast, neighboring Bangladesh faces heightened vulnerability, prompting Fitch Ratings to downgrade its outlook to negative from stable. The agency cited Bangladesh's exposure to the Iran conflict, including risks to trade, remittances, and energy supplies, as key factors weighing on its sovereign credit profile. This shift underscores how the war's ripple effects are prompting caution among rating agencies for import-dependent South Asian economies.

Further afield, Zambia's central bank bucked a global trend of monetary caution by cutting interest rates, extending its easing cycle as local inflation projections cool. Unlike many policymakers adopting a wait-and-see stance to assess the Iran war's inflationary impact, Zambia prioritized domestic conditions, signaling confidence in its disinflation path despite elevated global risks.

The diverging paths among these economies illustrate the broader challenges posed by the Iran war, now in its early stages with no clear resolution. For Pakistan, sustaining growth will hinge on managing fuel import bills and potential fiscal pressures, while affected nations like Bangladesh may seek international support to mitigate downturn risks. Investors and governments worldwide are monitoring oil markets closely, as prolonged disruptions could reshape regional economic trajectories.