After enduring a slowdown triggered by political turmoil, Bangladesh’s economy is on track for a tentative recovery, according to the World Bank. Domestic demand improvements and calmer conditions are expected to fuel this upturn, with fiscal year 2025-26 growth forecasted at 3.9 percent.
Political instability toward the end of 2024 severely disrupted investments, exports, and economic activity, the report notes. Recovery hinges on private consumption as the primary growth engine, though financial sector limitations and lingering uncertainties could temper investment inflows.
While exports, particularly ready-made garments, will offer some support, global tariffs and competitive pressures limit their role as a major driver. Inflation poses a major risk, with currency weakening, supply chain issues, and elevated food costs keeping prices high and squeezing household budgets.
To combat inflation, monetary authorities have maintained stringent policies and high interest rates, which have curtailed lending and private sector investment. High non-performing loans in banks further erode confidence and lending ability. On the external front, volatile energy prices and import dependence threaten fiscal and current account stability.
The World Bank stresses that implementing reforms and ensuring political steadiness could unlock stronger growth ahead. It forecasts expansion reaching 4.6 percent in the next fiscal year and surging to 6.1 percent by 2026-27, as inflation moderates and investments revive.
Bangladesh’s impressive track record as a South Asian growth leader, built on garment exports and manufacturing prowess, faces ongoing threats from financial vulnerabilities and geopolitical risks. Navigating these will be crucial for a sustained rebound.
