Exports to Europe stagnate amid challenges

2026-03-29 - 04:20

ISLAMABAD: Pakistan’s exports to major Western European markets are experiencing a consistent decline despite GSP+ status, sparking concerns over diminishing demand for Pakistani goods. The decline occurs as the European Union has signed a free trade agreement (FTA) with India on Jan 27, a major textile competitor of Pakistan, and amid initial concerns that Pakistan might be excluded from the GSP+ scheme, which offers duty-free access for certain products. Trade analysts warn that the ongoing conflict in the Middle East may further reduce export demand, as rising energy costs are likely to constrain consumer spending in Europe, which is already under pressure from the economic fallout of the Ukraine war. They caution that these strains could decrease purchasing power and further impact demand for imported goods, including those from Pakistan. Official data compiled by the State Bank of Pakistan showed that exports to European countries recorded a marginal year-on-year increase of 0.95 per cent to $6.122 billion during the July-February period of 2025-26 compared to $6.064bn a year earlier. GSP+ benefits fail to boost shipments The slowdown is mainly driven by a decline in shipments to northern and western European states. In FY25, exports to the EU rose 7.44pc year-on-year to $8.863bn. In FY24, exports to the EU dipped 3.12pc to $8.240bn. Western Europe, which includes countries such as Germany, the Netherlands, France, Italy, and Belgium, accounts for the largest share of Pakistan’s exports to the EU. Exports to this region declined slightly by 3.22pc to $2.952bn in 8MFY26, from $3.050bn in FY25. There will be a greater challenge for exporters to retain market share following the ongoing conflict in the Middle East coupled with rising input costs in the country. Exports to northern Europe also slightly declined by 2.75pc to $487.398m in 8MFY26, from $501.216m in the same months last year. However, there is a slight increase in exports to Eastern and Southern Europe. Exports to Southern Europe rose by 7.16pc to $2.171bn in 8MFY26 from $2.026bn in the same period last year. Within this region, exports to Spain saw modest growth of 7.52pc to $1.049bn in 8MFY26, compared to $975.621m in the previous year. Exports to Italy rose 5.53pc to $790.85m in 8MFY26 compared to $749.44m in the same period last year. Exports to Greece fell 5.87pc to $86.62m during the review months, compared to $92.03m in the previous year. However, exports to Eastern Europe increased by 5.06pc to $510.797m in 8MFY26 from $486.183m in the same period last year. Before Brexit, Pakistan’s major export destination was the United Kingdom. In