Economic growth to rise in two consecutive FYs

Bangladesh's economic growth is expected to rise over two consecutive fiscal years should the Gulf conflict not significantly prolong and global supplies gradually normalise, the Asian Development Bank says in a hope-raising latest prediction.
In the current fiscal year (FY) 2025-26, the economic growth is projected to increase to 4.0 per cent as services rebound, agricultural output normalizes, and investor sentiment strengthens following the general election in February 2026, says ADB's Asian Development Outlook (ADO), published on Friday.
In the next FY2027, the country's gross domestic product (GDP) growth could expand at a higher rate of 4.7 per cent due to rebound in investor confidence and other economic activities in the national election aftermath, the Manila-based lender says.
However, the World Bank has drawn a conservative economic outlook in its Bangladesh Development Update released Wednesday. It shows the country can grow at a 3.9-percent rate in the current fiscal for the compounding effects of the ongoing Middle East conflict and persistent domestic macroeconomic fragilities.
But the ADB in its ADO raises hope that the ongoing financial-sector reforms aimed at enhancing stability, transparency, and efficiency "should support economic expansion".
The Asian development financier says following a period of deceleration, Bangladesh's economy is projected to enter a recovery phase, with the GDP growth expected to rise over the next two fiscal years.
According to the latest ADO for April 2026, the country's GDP is to grow 4.0 per cent in FY2026 and further accelerate to 4.7 per cent in FY2027, up from a sluggish 3.5 per cent in FY2025.
"The anticipated recovery is largely anchored in strengthening domestic demand and a more stable political environment following the general election in February 2026," the outlook report reads.
The services sector is projected to be a primary engine of growth, expanding by 4.6 per cent in FY2026.
This rebound is supported by improved household purchasing power and ongoing financial-sector reforms, the bank says in its latest assessment.
Assuming favourable weather conditions and continued policy support, agricultural output is expected to normalise with a projected growth of 2.8 per cent in the outgoing financial year (FY2026).
According to the ADB, while industrial activity remained somewhat resilient during the previous slowdown, it is expected to strengthen further in FY2027 as export demand picks up and supply constraints-such as energy shortages and raw-material-sourcing difficulties-ease.
The role of consumption and investment in private consumption are forecast to remain the main driver of growth, bolstered by resilient remittance inflows and election-related public spending, the bank notes on the economic upside in the outlook.
Further enumerating the positives, it forecasts private and public investments are also expected to rise gradually as the government implements pledges focused on investment promotion and improving the ease-of-doing-business ambiance.
On the downside, the Asian Development Bank notes that despite the positive growth outlook, inflation remains a persistent challenge. Headline inflation is projected to remain elevated at 9.0 per cent in FY2026 due to high global energy prices and supply disruptions.
Inflation is expected to moderate slightly to 8.5 per cent in FY2027 as external shocks might subside and domestic supply conditions can improve.
Current account, another major macroeconomic parameter, which was broadly in balance in FY2025, is anticipated to move into a modest deficit of 0.5 per cent of GDP in FY2026.
"This shift reflects a widening trade deficit as a rebound in domestic investment and consumption drives up the demand for imports."
About the Mideast crisis stemming from US-Israel attacks on Iran, the ADB says a significantly prolonged conflict in the Gulf could disrupt global energy markets and shipping routes, further intensifying domestic inflationary pressures and straining external liquidity.
Rising interest payments and increasing public debt levels-projected to reach 42.4 per cent of GDP in FY2026-warrant prudent management.
Interest costs alone are estimated to account for nearly one-sixth of total government expenditure in FY2026, the ADB outlook notes.
Beyond global market volatility, weather-related shocks remain a persistent and perennial risk to the nation's economic stability.
Industrial activity is also expected to strengthen, supported by export growth, easing supply constraints, and the government's focus on infrastructure development and energy security.
"Downside risks to the outlook remain substantial, particularly if the conflict prolongs. Disruptions to global energy markets, shipping routes, and supply chains could drive sustained increases in oil and gas prices, intensifying domestic inflationary pressures and complicating ongoing disinflation efforts, thereby constraining macroeconomic-policy flexibility."
The lender says higher energy prices could also widen the fiscal deficit, especially if energy-related subsidies increase or the pass-through to consumers is delayed.
External-sector pressures may rise as exports and remittances soften amid slower economic activity in key Persian Gulf economies, while elevated import costs and freight rates would further strain the current account amid already-tight external liquidity.
Overall, the balance of risks is firmly tilted to the downside, underscoring Bangladesh's vulnerability to external shocks in a context of still-fragile macroeconomic conditions, the ADB alerts.
"Bangladesh is facing a difficult economic environment, shaped by global uncertainties, domestic structural constraints, and pressures on the external and financial sectors," says ADB Country Director Hoe Yun Jeong.
"The new government's reform agenda offers a timely opportunity to strengthen macroeconomic stability, restore private-sector confidence, and support recovery," Mr. Jeong hopes.
"With prudent policies and sustained reforms, the economy is well-positioned to reinforce resilience and return to a more inclusive growth path," he notes to underpin his cautious optimism.
The ADB concludes the success will likely hinge on government's ability to maintain "prudent policies and sustained reforms" to restore private-sector confidence and reinforce economic resilience.