Major international institutions project Pakistan’s GDP growth for the current fiscal year within a close range of three per cent to 3.6pc. However, this variation primarily reflects the timing of their assessments in relation to the 2025 monsoon floods . The International Monetary Fund’s (IMF) forecast of 3.6pc was formulated in October 2025 and does not incorporate the impact of the subsequent floods. In contrast, the State Bank of Pakistan’s (SBP) revised estimate of around 3.25pc and the World Bank’s projection of 3pc are later evaluations that explicitly account for the flood’s dampening effect on the economy, particularly the agricultural sector. Macroeconomic indicators for the first half of the year (July-December 2025) indicate that full-year growth would be somewhere between 3pc and 3.5pc in the best-case scenario. Though this exceeds Pakistan’s population growth of roughly 2.6pc, it still risks constraining recent gains in per-capita income and employment creation. Poverty reduction and improved social mobility, and meaningful job creation may remain elusive even as macroeconomic indicators show short-term stabilisation. Swift, broad-based employment creation is imperative for national stability and resilience in the increasingly competitive regional and global arena Much will also depend on the regional and domestic security environment, which remains fluid and difficult to forecast. Heightened tensions in the Middle East — particularly the risk of a limited or escalatory military confrontation involving the United States and Iran — could have indirect but significant repercussions for Pakistan. Such a scenario may disrupt global energy markets, raise oil prices, strain Pakistan’s import bill, and complicate external financing conditions at a time of fragile macroeconomic recovery. Diplomatic pressures could also intensify, placing Pakistan in a delicate position as it seeks to balance strategic neutrality with economic and security interests, including the safety and operational continuity of its diplomatic missions in the region. Even without a full-scale conflict, prolonged uncertainty alone could dampen investor confidence, delay capital inflows, and further weaken prospects for job creation and sustained growth. Rising domestic political polarisation is fraying social cohesion, and failure to create employment could intensify unrest. Pakistan simultaneously faces militancy, terrorism, and a volatile regional security environment, particularly as tensions escalate in the Middle East following the US-Iran imbroglio. In such circumstances, a stagnant labour market is not just an economic problem; it is a strategic vulnerability. The picture for 2026 is clear. Moderate GDP growth alone will not generate jobs. Automation, structural inefficiencies, informalisation, skill gaps, and demand suppression converge to constrain employment. Without bold policy interventions — including labour-intensive investment, workforce skill development, small and medium enterprise (SME) support, and education reform — Pakistan risks growth that is largely jobless, leaving both its workforce and national stability exposed. Labour-intensive sectors — historically engines of employment like construction, textiles, and agriculture — are no longer absorbing workers as they once did. Automation, mechanisation, and artificial intelligence adoption threaten jobs across industries, particularly in routine roles. Research from the Lahore University of Management Sciences Mahbub-ul-Haq Research Centre estimates that around 17 per cent of Pakistan’s workforce is at high risk of displacement due to technological adoption, with manufacturing, customer service, and portions of agriculture most exposed. Bangladesh’s ready-made garment sector demonstrates the consequences of this “jobless growth” dynamic: automation has reportedly reduced workforce numbers by 30pc or more in some factories, even as output and exports surged, leaving lower-skilled workers displaced and incomes stagnant. SMEs, long recognised as the backbone of Pakistan’s economy and employment, are under intense pressure. According to a joint Small and Medium Enterprises Development Authority and International Labour Organisation study, Pakistan’s roughly 5.24 million SMEs account for a substantial portion of economic activity, yet many struggle to survive amid high compliance costs, limited access to formal finance, and regulatory burdens. Estimates place the informal economy at 35–40pc of GDP, or approximately $457 billion, underscoring its critical role in sustaining livelihoods. Yet as documentation and regulatory demands rise, many small enterprises either shut down or operate outside the formal system, contributing to a “gigified” labour market of precarious, short-term, and underpaid work. The public sector, a fallback for labour absorption in the good old days, too, cannot act as an employer of last resort. The FY25 federal budget froze hiring for BPS 1–16 positions, projected to save Rs45 billion annually, while rightsizing initiatives have eliminated thousands of redundant posts across ministries and attached departments and the ongoing privatisation of overstaffed and financially unviable state-owned enterprises, like the Utility Stores Corporation, also produces a new wave of joblessness. Fiscal pressures and international reform conditionalities limit the government’s capacity to offset private-sector job shortfalls. This structural shift leaves the private sector, SMEs, and informal enterprises to shoulder the responsibility of employment creation, a burden made heavier by technological disruption and weak consumer demand. Even export growth, traditionally a key engine of employment in labour-intensive economies, is becoming less job-intensive. Pakistan’s textile and clothing sector (which accounts for 55–63pc of merchandise exports and roughly $16–18 billion in value) has shown modest growth in recent years. Yet employment in the sector has stagnated. Published in Dawn, The Business and Finance Weekly, January 19th, 2026