The World Bank has forecast that the slowdown in Bangladesh’s economic growth may continue for some time. According to the organization, the country’s Gross Domestic Product (GDP) growth could stand at 3.4 percent in the fiscal years 2026 and 2027. However, growth might slightly increase to 3.9 percent in fiscal year 2028.
This economic outlook for Bangladesh was highlighted in the World Bank’s October 2026 Bangladesh Development Update, published on Tuesday (October 6). The report was released under the title ‘Make Subsidies and Social Protection Work Better for the Poor’.
The report states that the World Bank has reduced its growth forecast for fiscal year 2027 by 1.2 percentage points compared to its previous estimate. Similarly, the forecast for fiscal year 2026 has also been lowered by 0.5 percentage points.
According to the World Bank, Bangladesh’s economic growth has been slowing down since 2023. Weaknesses in the energy and financial sectors, a deficit in domestic revenue collection, and global uncertainties have put pressure on investment and economic activities.
The report further notes a decline in investment, a slowdown in export growth, and reduced purchasing power due to high inflation. Concurrently, the cost of doing business has also increased.
The World Bank stated that weaknesses in the financial sector are negatively impacting credit flow and investor confidence. Limited revenue capacity is also hindering public investment. However, the country’s external sector remains relatively stable due to strong remittance inflows and improvements in foreign exchange reserves.
Jean Pesme, World Bank Country Director for Bangladesh and Bhutan, said that rapid and significant reforms in the banking sector, domestic revenue mobilization, and the energy sector are essential to avoid an economic downturn and return to inclusive growth.
Poverty and Non-Performing Loans on the Rise
The World Bank report indicates that poverty and inequality increased in Bangladesh in fiscal year 2026. Approximately 2.1 million people have fallen into new poverty compared to the previous year. Concurrently, job creation has stagnated, and a significant number of women have lost their employment.
The organization also noted that the situation in the banking sector is alarming. The non-performing loan (NPL) rate rose from 30.6 percent in December 2025 to 33.2 percent in June 2026.
Meanwhile, Bangladesh’s revenue collection rate relative to GDP is 8.3 percent, one of the lowest in the world. The fiscal deficit increased to 3.9 percent of GDP in fiscal year 2026, up from 3.5 percent in the previous fiscal year.
Social Protection to Aid the Poor
The World Bank stated that social protection programs, along with energy and agricultural subsidies, are helping the poor. However, almost half of the country’s poorest households are still not covered by any social protection program.
On the other hand, the World Bank has forecast that South Asia’s economic growth could be 6.9 percent this year. This growth may slightly decrease to 6.7 percent in 2027.
The organization also stated that the use of Artificial Intelligence (AI) could create new growth opportunities in South Asia’s economy.
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