Bangladesh’s economy has yet to deliver the rebound expected after the return of political stability, with the World Bank sharply cutting its growth forecast for both FY26 and FY27 to 3.4%.
The latest projection marks a 1.2-percentage-point downgrade for FY27 from the World Bank’s June forecast of 4.6%. The lender also lowered its FY26 forecast to 3.4% from 3.8% projected in June.
The latest Bangladesh Development Update, released Tuesday, represents a significant deterioration in the World Bank’s outlook for the economy.
In January 2026, the World Bank had projected Bangladesh’s GDP growth at 6.1% for FY27. It cut the forecast to 4.6% in June and has now further reduced it.
The FY26 forecast has followed a similar downward path, falling from 4.6% in January to 3.8% in June.
The latest FY27 projection is 2.7 percentage points below the January forecast and 3.1 percentage points below the government’s 6.5% growth target.
“To avert economic downturn and return to an inclusive growth path, driven by private investment, fast and bold reforms are needed in banking sector, domestic revenue mobilisation, and energy sector,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.
“The country needs to respond with urgency and speed up the reforms essential for protecting the poor and creating more and better jobs. The time to act is now,” he said.
Investment activity has weakened, exports have lost momentum and high inflation has reduced household purchasing power while increasing business costs, the lender said.
Weaknesses in the banking sector are also undermining credit intermediation and investor confidence, while limited fiscal space is constraining the government’s ability to increase public investment.
Despite the weak growth outlook, the external sector has remained resilient, supported by strong remittance inflows and improving foreign exchange reserves.
The World Bank expects growth to recover modestly to 3.9% in FY28, provided energy supplies improve gradually and reform efforts accelerate.
The prolonged weakness is also taking a toll on households and employment. Around 2.1 million more people were living in poverty in FY26 than a year earlier, while job creation stalled and women experienced job losses.
Banking sector stress has intensified, with the non-performing loan ratio rising to 33.2% in June 2026 from 30.6% in December 2025.
Revenue mobilisation remains particularly weak, with government revenue collection at just 8.3% of GDP, among the lowest levels globally. The weak revenue position has constrained public spending, while the fiscal deficit widened to 3.9% of GDP in FY26 from 3.5% in FY25.
The World Bank said urgent reforms in the banking, revenue and energy sectors are needed to restore private investment, strengthen economic activity and create jobs.