Afghanistan’s economy is showing signs of modest resilience, with real GDP growth estimated at 4.8 percent in 2026, despite ongoing regional tensions, border disruptions, and structural challenges. However, according to the latest Afghanistan Development Update released by the World Bank, this growth is not translating into improved living standards for the population.
The report highlights a widening gap between economic output and household welfare, driven largely by rapid population growth, weak investment, and persistent structural constraints. With population growth estimated at around 11 percent in 2025, economic expansion is being outpaced, resulting in a 5.6 percent decline in GDP per capita.
Inflation has also accelerated, rising to 7.6 percent by March 2026 after averaging 3.6 percent previously. This increase is being driven by higher food prices, supply chain constraints, and strong domestic demand. As a result, household purchasing power continues to decline, worsening food insecurity and poverty levels across the country.
A significant factor in Afghanistan’s recent demographic and economic pressure is the return of approximately 3.7 million Afghans, which has added strain to already limited economic resources and infrastructure capacity. While domestic demand has supported short-term growth, it has not been sufficient to offset broader economic pressures.
On the fiscal side, domestic revenue collection has improved, reaching nearly 19.8 percent of GDP in 2025 due to stronger tax enforcement. However, declining external grants have limited public investment in infrastructure and reduced the government’s ability to respond to economic shocks.
Afghanistan’s external position remains fragile, with a widening current account deficit estimated at 36.1 percent of GDP in 2025. This reflects heavy dependence on imports, weak export performance, and declining external inflows, all of which continue to pressure the country’s balance of payments.
The private sector has shown some signs of recovery, including improvements in sales, employment, and investment since 2022. However, growth remains constrained by structural issues such as unreliable electricity supply, limited access to finance, and widespread informality in the economy.
According to World Bank officials, sustaining recovery will require targeted reforms focused on strengthening the private sector, improving financial access, and investing in infrastructure to support job creation and long-term development.
Looking ahead, economic growth is projected to moderate to around 4 percent in 2026, though risks remain elevated due to regional instability, declining aid flows, and ongoing demographic pressures. The World Bank warns that without deeper structural reforms, economic gains will continue to fall short of improving living standards for most Afghans.
The Afghanistan Development Update forms part of the World Bank’s ongoing monitoring and analytical work aimed at informing policymakers and the international community on the country’s economic trajectory and development challenges.
