KABUL, May 26, 2026 - Afghanistan's economy continues to grow modestly - with real GDP estimated at 4.8 percent -- despite regional tensions and border closures, driven in part by strong domestic demand and the return of millions of Afghans to the country. Yet this growth is not translating to better living standards or higher incomes. Rapid population growth of around 11 percent in 2025, weak investment, and deepening structural constraints are eroding its benefits, according to the World Bank's latest Afghanistan Development Update. The Spring 2026 report offers an in-depth assessment of recent economic developments and the medium-term outlook, with a special focus on private sector development.
The return of around 3.7 million Afghans has outpaced economic expansion, resulting in a 5.6 percent decline in GDP per capita. At the same time, inflation has accelerated, further eroding household purchasing power. After averaging 3.6 percent, inflation climbed to 7.6 percent by March 2026, driven by food price pressures, supply constraints, and strong demand. These developments are compounding already severe food insecurity and poverty across the country.
Domestic revenue collection improved significantly, reaching 19.8 percent of GDP in 2025, supported by stronger tax enforcement. However, a decline in external grants has resulted in limited investment in infrastructure and the ability to respond to economic shocks.
Afghanistan's external position remains fragile, with a widening trade deficit driven by strong import demand and weak export performance. The current account deficit is estimated to have widened to 36.1 percent of GDP in 2025, reflecting structural dependence on imports and declining external inflows. The private sector shows signs of resilience but remains constrained. Firm-level data indicate a rebound in sales, employment, and investment since 2022. However, structural barriers-including unreliable electricity, limited access to finance, and widespread informality-continue to impede sustained growth and job creation.
"Afghanistan's economy is showing resilience in the face of significant headwinds, but growth alone is not enough," said Faris Hadad-Zervos, World Bank Country Director for Afghanistan. "With millions of Afghans returning home, rapid population growth is outpacing economic gains - pushing down incomes and deepening poverty and fragility. Unlocking the private sector's potential and improving access to finance are some of the essential steps to help drive job creation and, ultimately, improve people's lives."
Looking ahead, economic growth is projected to moderate to around 4 percent in 2026, but may be lower depending on the duration and severity of the conflict in the Middle East. Continued population growth, declining aid, and external shocks-especially from regional instability-are expected to weigh on the outlook.
Sustaining recovery will require policies that strengthen the private sector, improve access to finance, invest in infrastructure, and create opportunities for productive employment. Addressing structural constraints will be critical to improved livelihoods and more resilient, inclusive growth.
About the Afghanistan Development Update:
The Afghanistan Development Update is part of the World Bank's ongoing research, monitoring, and analytical work on Afghanistan's economy and society. It aims to support evidence-based policymaking and inform the international community on economic developments in Afghanistan.
