Bangladesh’s economic growth is expected to remain subdued in the coming years, with the World Bank projecting GDP growth at 3.4% in both fiscal years 2026 and 2027, before rising to 3.9% in FY2028.
The projections were published in the World Bank’s October 2026 Bangladesh Development Update, titled “Make Subsidies and Social Protection Work Better for the Poor,” released on Tuesday.
The World Bank has lowered its FY2027 growth forecast by 1.2 percentage points from its previous estimate. Its FY2026 forecast has also been cut by 0.5 percentage points.
According to the report, Bangladesh’s economic growth has been slowing since 2023 amid weaknesses in the energy and financial sectors, inadequate domestic revenue mobilisation and global uncertainties. These challenges have put pressure on investment and overall economic activity.
Investment has weakened, export growth has slowed and high inflation has eroded people’s purchasing power, while rising business costs have further constrained economic activity, the report said.
The World Bank noted that weaknesses in the banking sector are adversely affecting credit flows and investor confidence. Limited revenue capacity is also constraining public investment.
However, the country’s external sector has remained relatively stable, supported by strong remittance inflows and an improvement in foreign exchange reserves.
Jean Pesme, World Bank Country Director for Bangladesh and Bhutan, said Bangladesh needs rapid and substantial reforms in the banking, domestic revenue mobilisation and energy sectors to avoid an economic downturn and return to a path of inclusive growth.
The report also found that poverty and inequality increased in FY2026. Around 2.1 million people fell into poverty compared with the previous year, while job creation stalled and women experienced employment losses.
The banking sector has also come under increasing pressure. The share of non-performing loans rose to 33.2% in June 2026 from 30.6% in December 2025, according to the report.
Bangladesh’s revenue mobilisation remains among the lowest in the world, with revenue standing at just 8.3% of GDP. The fiscal deficit widened to 3.9% of GDP in FY2026, compared with 3.5% in the previous fiscal year.
The World Bank said social protection programmes, along with energy and agricultural subsidies, are providing support to poorer households. However, nearly half of the poorest families remain outside any social protection programme.
Meanwhile, economic growth in South Asia is projected at 6.9% this year, before slowing to 6.7% in 2027, the World Bank said.
The bank also noted that the growing use of artificial intelligence could create new opportunities for economic growth across the region.
