Farrukh Khosru :
Bangladesh’s economy is projected to experience a modest recovery over the next two fiscal years, following a sharp slowdown in FY2024/25 caused by political unrest, rising input costs, and subdued industrial activity.
According to recent projections by the World Bank flagship report dubbed as Global Economic Prospects, June 2025, gross domestic product (GDP) growth is estimated to have slowed to 3.3 per cent in the current fiscal year (July 2024 to June 2025), marking one of the most pronounced decelerations among South Asian economies.
The downturn reflects both internal political instability and external economic pressures, including high global inflation and declining exports.
As per the report published yesterday, the economic performance during FY2024/25 was hampered significantly by political turmoil earlier in the year. Heightened uncertainty discouraged investment, while a decline in the import of capital goods curtailed industrial output. Rising input costs for raw materials and intermediate goods further constrained production and investment across key sectors.
Inflation remained persistently high throughout the fiscal year, staying well above the central bank’s target despite multiple policy rate hikes. This, in turn, contributed to subdued credit growth to the private sector, restricting business expansion and household consumption.
Despite global uncertainties, Bangladesh’s economy is forecast to rebound gradually, with GDP growth projected at 4.9 per cent in FY2025/26 and 5.7 per cent in FY2026/27.
The recovery is expected to be supported by Improved political stability, which may revive investor confidence, Structural reforms aimed at enhancing the business environment and creating employment opportunities, Resilient remittance inflows, bolstering household consumption and supporting external accounts and Gradual easing of inflation, which could improve purchasing power and consumer spending.
Nonetheless, projected growth remains below the country’s pre-pandemic trend, raising concerns over the slower pace of poverty reduction and the need to address structural bottlenecks.
Bangladesh is expected to maintain a sizeable fiscal deficit, in line with broader regional trends. While capital expenditures are set to decline, increased current spending-including subsidies – is projected to partially offset this reduction.
On the monetary front, easing inflation is likely to lead to a more accommodative policy stance, which may support credit expansion and economic activity. However, inflation risks remain, particularly in the event of global supply shocks or domestic weather-related disruptions.
Per capita income growth is expected to recover modestly but will likely remain below the rates seen in the decade before the Covid-19 pandemic. This suggests a gradual reduction in poverty, although high poverty levels may persist without more inclusive growth and effective social protection strategies.
The economic recovery faces significant downside risks, including Global trade tensions and financial tightening, which could hurt exports and trigger capital outflows, Domestic instability, particularly any resurgence of political unrest that could undermine investor confidence, Banking sector vulnerabilities, especially if public debt continues to rise without corresponding improvements in revenue generation, Natural disasters, such as floods and cyclones, which could severely impact food security and infrastructure and Reduced aid and concessional financing, which may limit public investment in development projects.
Bangladesh’s path to recovery is cautiously optimistic. While the outlook for FY2025/26 and beyond is brighter compared to the current fiscal year, macroeconomic resilience will depend heavily on sustained political stability, effective policy implementation, and favourable external conditions.
To capitalise on the expected rebound, the report suggests that policymakers must remain vigilant in managing inflation, strengthening the financial sector, and ensuring that growth is inclusive and sustainable.
