Pakistan's exports to Europe fall in first quarter of FY27 despite GSP+

Despite being categorized under Generalised Scheme of Preferences (GSP+) status, Pakistan's exports to European markets witnessed a decline in the first quarter of 2026-27 compared to the previous year. Overall exports to Europe dropped modestly, although they experienced a slight increase in profits from southern and northern European countries during the July-September quarter, raising concerns among policymakers.

The ongoing conflict in the Middle East has exacerbated the decline in exports to these markets, along with the European Union's preferential market access extended to India, one of Pakistan's primary competitors in textiles. According to data from the State Bank of Pakistan, exports to European countries decreased by 1.84% to $2.350 billion in 1QFY27, down from $2.394 billion in the same period last year.

Trade analysts caution that the Middle East conflict may further dampen export demand, as escalating energy costs are expected to squeeze consumer spending in Europe, which is already grappling with the economic repercussions of the Ukraine war. Exports to northern Europe rose by 21.07% to $236.321 million in 1QFY27, up from $195.191 million a year ago.

In the southern European region, exports surged by 5.26% to $879.896 million in 1QFY27, compared to $835.862 million in the corresponding period last year. In this area, exports to Spain increased by 17.78% to $451.244 million, while exports to Italy declined by 8.49% to $298.731 million. Exports to Greece rose by 3.52% to $34.961 million during the months under review, compared to $33.774 million in the previous year.

However, exports to eastern Europe fell by 15.05% to $168.761 million in 1QFY27, down from $198.677 million. Prior to Brexit, the United Kingdom was Pakistan's primary export destination. In the post-Brexit period, Pakistan's exports to the UK surged by 6.64% to $612.305 million in 1QFY27, up from $574.171 million a year ago. Western Europe, comprising countries such as Germany, the Netherlands, France, Italy, and Belgium, accounts for the largest share of Pakistan's exports to the EU.

Nevertheless, exports to this region declined by 8.51% to $1.065 billion in 1QFY27, down from $1.164 billion in 1QFY26. Exports to Germany shrank by 12.77% to $389.116 million, while exports to the Netherlands, the second-largest market for Pakistani goods, declined by 3.07% to $370.005 million. Exports to France fell by 0.47% to $136.030 million, followed by a 7.57% decline in exports to Belgium, from $137.871 million.