ADB forecasts 5pc growth for BD in FY26
Business Report :
Bangladesh’s economy is likely to grow by 5 percent in fiscal year of 2026, slightly higher than the previous year, said the Asian Development Bank (ADB) on Monday.
In its Asian Development Outlook for September 2025, the Manila-based lender said services and agriculture are expected to drive economic expansion, supported by easing inflation, stronger household purchasing power, rising remittances and election-related public spending.
The economy expanded by 4.2 percent in FY2024 and it is estimated to grow by 4 percent in the following year.
“Future growth will depend on improving the business environment to boost competitiveness and attract investment, and on ensuring reliable energy supplies,” said ADB Country Director for Bangladesh Hoe Yun Jeong.
“The impact of US tariffs on Bangladesh’s trade remains to be seen, and vulnerabilities in the banking sector persist. Addressing these challenges is essential to achieving higher economic performance.”
He added, “Some downside risks to the FY2026 outlook persist. Trade uncertainty, banking sector weaknesses, and potential policy slippages could impede progress. Maintaining prudent macroeconomic policies and accelerating structural reforms are critical to strengthening resilience.”
The ADB said inflation in Bangladesh is estimated to rise from 9.7 percent in FY2024 to 10.0 percent in FY2025, driven by limited competition in wholesale markets, inadequate market information, supply chain constraints, and the weakening of the taka.
According to the ADO, the Bangladesh current account – a record of the flow of money into and out of the country in the form of imports and exports and the international transfer of capital – is expected to post a small surplus in FY2025, up from the previous year, supported by a narrowing trade gap and robust remittance inflows.
Looking ahead, the ADO September 2025 forecasts that consumption will remain the primary driver of growth in FY2026, spurred by robust remittance inflows and election-related spending.
“However, contractionary monetary and fiscal policies, along with heightened investor caution, are expected to dampen investment. Global tariff hikes, including a 20 percent tariff on Bangladeshi exports to the US, and stiffer competition in the EU is expected to weigh on exports and growth. Exporters may be compelled to reduce unit prices in response to this heightened competition.”
On the supply side, services are expected to expand, driven by improved household purchasing power. Agricultural growth is likely to normalize, contingent on favorable weather and effective government policy support. In contrast, industrial growth may slow as US tariffs constrain economic activity.
The ADB highlighted rising stress in the banking system, with the non-performing loan ratio surging from 12.6 percent in June 2024 to 24.1 percent by March 2025, while exceeding 45 percent in state-owned banks. Asset quality reviews may reveal further risks, with implications for stability and credit growth, according to the lender.
The ADB called for stricter provisioning, credible restructuring and recapitalization, stronger central bank oversight, and the establishment of a bank resolution framework to address the issue.