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It expects Bangladesh’s economy to rebound to 5.1 percent in FY26
Published : 09 Apr 2025, 01:29 PM
The Asian Development Bank (ADB) has revised down Bangladesh’s GDP growth forecast to 3.9 percent for the fiscal year 2024-25, citing a combination of political instability, high inflation, and a decline in global demand.
In its Asian Development Outlook for April, published on Tuesday, the ADB paints a cautious picture of the country’s economic trajectory as it navigates domestic challenges and global uncertainties.
The latest projection, down from 5.1 percent in September, marks the slowest growth rate since the COVID-19 pandemic.
“Growth in FY2025 is expected to moderate further, following just 1.8 percent growth in the first quarter,” the report said, attributing the downturn to political unrest, worker protests, natural hazards, and suppressed purchasing power amid persistent inflation.
The growth forecasts, however, were finalised prior to the announcement of new tariffs by the US on Apr 2, and so the baseline projections only reflect tariffs that were in place previously, the Manilla-based lending agency said.
Despite the grim outlook for the current year, the ADB expects Bangladesh’s economy to rebound to 5.1 percent in FY26, supported by easing inflation, stronger remittances, and improved investor confidence ahead of the next general elections.
Inflation, however, remains a key concern. The ADB projects it will average 10.2 percent in FY25, up from 9.7 percent the previous year, before easing to 8.0 percent in FY2026. The report also noted that the country's central bank had responded with tighter monetary policy, including raising the repo rate and allowing market-driven interest rates to counter inflation and stabilise the foreign exchange market.
On the external front, the current account deficit is expected to narrow to 0.9 percent of GDP in FY25, thanks to a recovery in exports -- particularly in the ready-made garments sector -- and robust remittance inflows.
However, the report warns that exports could face further pressure from additional tariffs imposed by the US and a potential economic slowdown in key markets.
The report also underscores the urgent need to improve the investment climate and reform the regulatory environment to attract foreign direct investment (FDI), especially with Bangladesh's scheduled graduation from least developed countries (LDC) status in 2026.
Despite the country’s large labour force and strong export record, FDI inflows remain low compared to other economies in the region.
ADB analysts emphasised that reforms to simplify business regulations, enhance transparency, and strengthen governance were crucial to restoring macroeconomic stability and sustaining long-term growth.
