WB: Bangladesh's GDP growth would rise to 4.8% in FY26, 6.3% in FY27

According to the latest Bangladesh Development Update released by the World Bank on Tuesday, the country's GDP growth would rise to 4.8% in fiscal year 2025–26 (FY26), recovering from a 4% slowdown in the previous fiscal year 2024–25 (FY25) as the country's economy showed a significant rebound during the second of FY25 after a disruptions in the first half of the same fiscal year. 

The strong export performance, record remittance inflows and rising foreign exchange reserves played vital roles in accelerating the GDP growth. A shift to a market-based exchange rate and a narrowing current account deficit helped ease external pressure.

However, the report also notes signs of resilience in the economy while warning that bold and timely reforms are essential to sustain and accelerate growth in the years ahead. The World Bank also emphasizes that urgent reforms are crucial to sustaining growth and creating jobs, especially for youth and women.

An adoption of market-based exchange rate, foreign exchange reserves, and the current account deficit helped ease external pressure in FY25.

Inflation began to moderate due to tighter monetary policy, lower import duties on essential food items and favourable agricultural output, though the fiscal deficit widened due to weak tax collection and increased subsidies and interest payments.

However, Inflation is expected to ease gradually, with consumer prices potentially reducing to around 5.5% by FY27. 

Also, the challenges remain, including political uncertainty surrounding the national elections, vulnerabilities in the banking sector, and global economic pressures.

Meanwhile, the fiscal deficit is expected to remain below 5% of GDP while public debt is projected to rise to 40.3% of GDP by FY27.

The export sector, particularly the ready-made garment (RMG) industry, is expected to remain resilient while the industrial sector is expected to grow moderately. 

The non-RMG industries may face constraints due to high operational costs and political instability.

The services sector could benefit from increased household purchasing power, and the agricultural sector is expected to maintain its long-term average growth rate of 3.1%.

The report notes that poverty rose between 2023 and 2024, with labour force participation falling from 60.9% to 58.9%, with women disproportionately affected. Of the 3 million additional working-age people outside the labor force, 2.4 million were women.

Jean Pesm, World Bank Division Director for Bangladesh and Bhutan, said that the economy has shown resilience, but this cannot be taken for granted. 

“To ensure strong growth and more and better jobs, Bangladesh needs bold reforms and faster implementation, particularly in domestic revenue mobilization, banking sector vulnerailities, energy subsidy reduction, urbanization planning, and improving the investment climate,” he added. 

The report stated that Bangladesh to rethink spatial development strategies to reduce regional disparities and foster inclusive job creation. Industrial jobs remain concentrated in Dhaka and Chattogram, noting the need for more balanced infrastructure development and job distribution.

The World Bank has outlined several urgent reform priorities, including improving domestic resource mobilization, addressing banking sector vulnerabilities, controlling inflation, reducing energy subsidies, and improving the business climate. 

The path to a higher growth trajectory will depend on the the government's ability to implement reforms that foster inclusivity, reduce inequality, and create a more dynamic private sector. While the growth forecast offers cautious optimism, the window for action is narrow—and the time for reform is now.

“The economy has shown resilience, but this cannot be taken for granted,” Jean Pesme added.