ADB further cuts Bangladesh’s growth forecast to 4pc amid ME war
The Asian Development Bank (ADB) has cut Bangladesh’s economic growth further to 4 percent for the current fiscal year 2025-26 from its previous projection of 4.7 percent amid a fuel price spike and disruption in global supply chains due to the war in the Middle East.
The ADB said the economy might pick up and grow by 4.7 percent in the next fiscal year 2026-27, according to the latest Asian Development Outlook (ADO) April 2026 released on Friday.
This is the third time the ADB has revised down its Gross Domestic Product (GDP) growth forecast for Bangladesh.
The Manila-based lender in December forecast 4.7 percent GDP growth in the current fiscal year, down from its September forecast of 5 percent. In April last year, the ADB had projected 5.1 percent growth for the same year.
“Bangladesh is facing a difficult economic environment, shaped by global uncertainties, domestic structural constraints, and pressures on the external and financial sectors,” said ADB Country Director Hoe Yun Jeong.
“The new government’s reform agenda offers a timely opportunity to strengthen macroeconomic stability, restore private sector confidence, and support recovery,” he added.
“With prudent policies and sustained reforms, the economy is well-positioned to reinforce resilience and return to a more inclusive growth path,” he said.
Inflation is projected to remain elevated at 9 percent in FY2026, despite some easing, reflecting persistently high global energy prices and ongoing supply disruptions.
It is expected to moderate to 8.5 percent in FY2027 as external shocks subside and domestic supply conditions improve.
The current account is anticipated to record a modest deficit of 0.5 percent of GDP in FY2026, widening slightly to 0.6 percent in FY2027, driven by stronger import demand and a broader trade deficit.
Remittance inflows are expected to remain resilient in the near term, notwithstanding ongoing tensions in the Middle East.
The ADO April 2026 projects moderate growth in consumption and investment, supported by strong remittance inflows and election-related public spending, alongside the government’s implementation of its pledges to promote investment and improve the ease of doing business.
On the supply side, services are expected to rebound, driven by improved household purchasing power, increased social protection spending, and ongoing financial sector reforms.
Agricultural output is projected to normalize, assuming favorable weather conditions and continued policy support. Industrial activity is also expected to strengthen, supported by export growth, easing supply constraints, and the government’s focus on infrastructure development and energy security.
Downside risks to the outlook remain substantial, particularly if the conflict prolongs.
Disruptions to global energy markets, shipping routes, and supply chains could drive sustained increases in oil and gas prices, intensifying domestic inflationary pressures and complicating ongoing disinflation efforts, thereby constraining macroeconomic policy flexibility.
Higher energy prices could also widen the fiscal deficit, especially if energy-related subsidies increase. External sector pressures may rise as exports and remittances soften amid slower economic activity in key Persian Gulf economies, while elevated import costs and freight rates would further strain the current account amid already tight external liquidity.
Overall, the balance of risks is firmly tilted to the downside, underscoring Bangladesh’s vulnerability to external shocks in a context of still-fragile macroeconomic conditions.
Climate related shocks remain an additional, persistent risk.
