Pakistan's central bank said Friday that it expects an economic boost as the security situation improves, voicing confidence days ahead of the one-year anniversary of the country's deadliest ever extremist attack.

The statement came in the bank's annual report reviewing the country's economic performance for the fiscal year that ended in June 2015.

Islamabad has estimated that a battle against extremism in the country has cumulatively cost some 8.7 trillion rupees ($85 billion) since 2001, an amount equal to one third of GDP in 2015.

The December 16, 2014 attack on a school in the northwestern city of Peshawar, in which Taliban insurgents gunned down more than 150 people, galvanised broad support for decisive action against militancy in Pakistan, the report said.

The military intensified an ongoing offensive against militants and the government launched a sweeping plan to tackle extremism in the wake of the attack.

Levels of militancy-linked violence dropped dramatically, with 2015 on course for the fewest deaths among civilian and security forces since 2007.

"We expect the elimination of a major threat to national security would also take out one of the most important growth-retarding factors for the country," the central bank said.

The government has predicted GDP will grow by 5.5 percent in the current fiscal year ending June 2016, compared to 4.2 percent last year, but the bank was more cautious, predicting growth of 4.0-5.0 percent.

The fiscal cost of fighting extremism may not fall immediately, the bank warned, but "we expect the relatively stable security situation in the country would help in rebuilding business and investor confidence".