Bangladesh's growth engine is set for a cautious pickup, but the road ahead remains riddled with uncertainty, the Asian Development Bank warned in its latest Asian Development Outlook (ADO) April 2026, released on Friday.
The Manila-based lender projects the country's Gross Domestic Product (GDP) to grow by 4.0 per cent in FY2026, inching up to 4.7 per cent in FY2027-recovering from a subdued 3.5 per cent in FY2025.
Yet the optimism is tempered. The ADB flags the ongoing US-Iran conflict as a looming drag on the economy, though it expects the shockwaves to gradually
dissipate.
The report cautions that persistently high global fuel prices could deepen fiscal strains. A failure to adjust domestic prices in time-or a surge in subsidies-may widen the budget deficit further, adding to macroeconomic pressures.
The modest growth outlook hinges on a rebound in consumption and investment, as political uncertainty eases in the aftermath of the general election. While supply chain disruptions linked to Middle East tensions rattled economic activity in the previous quarter, their effects are expected to fade.
"Bangladesh is facing a difficult economic environment, shaped by global uncertainties, domestic structural constraints, and pressures on the external and financial sectors," said Hoe Yun Jeong.
He noted that the new government's reform push presents a critical window to stabilise the economy, revive private sector confidence, and steer recovery. With disciplined policies and sustained reforms, the country could rebuild resilience and return to a more inclusive growth trajectory, he added.
Inflation, however, remains stubbornly high. The ADB forecasts it at 9.0 per cent in FY2026, easing slightly to 8.5 per cent in FY2027, driven by elevated global energy costs and lingering supply disruptions.
On the external front, the current account is expected to post a modest deficit-0.5 per cent of GDP in FY2026, widening to 0.6 per cent in FY2027-as import demand strengthens and the trade gap expands. Remittance inflows are likely to hold steady, despite ongoing tensions in the Middle East.
The report sees moderate gains in consumption and investment, buoyed by remittances and election-related public spending, alongside government efforts to improve the business climate.
Sectorally, services are poised for a rebound on the back of stronger household purchasing power, expanded social protection, and financial sector reforms. Agriculture is expected to stabilise with favourable weather and continued policy support, while industry may gain traction from export growth, easing supply bottlenecks, and ongoing infrastructure and energy initiatives.
Still, the risks are heavily skewed to the downside. A prolonged geopolitical conflict could disrupt global energy markets, shipping routes, and supply chains-pushing oil and gas prices higher and stoking inflation at home.
Rising energy costs may further strain public finances, particularly if subsidies swell or price adjustments lag. External pressures could intensify as exports and remittances weaken amid slower growth in key Gulf economies, while higher import bills and freight costs weigh on an already fragile current account.
In sum, the ADB underscores Bangladesh's vulnerability to external shocks at a time when macroeconomic stability remains delicate. Climate-related risks add another persistent layer of uncertainty to the outlook.
AFP adds: The Middle East war is expected to drag on Asia's economies over this year and next, the Asian Development Bank warned Friday, as it predicted growth to slow to 5.1 percent across the world's most populous region.
That prediction could prove optimistic, however, if new evidence suggesting a "more prolonged conflict and more persistent disruptions" bore out, it said.
Growth predictions could fall to as low as 4.7 percent for 2026 and 4.8 percent in 2027 should the US-Israeli war with Iran drag into the third quarter.
"Most economies in developing Asia and the Pacific will see their growth outlook worsen this year and in 2027," was the bank's stark assessment.
The region's status as a net energy importer left it particularly vulnerable to the war's fallout, ADB chief economist Albert Park told reporters at an embargoed Thursday new briefing
"Higher energy prices can generate significant income losses," Park said.
"Even after energy prices normalise, supply-chain disruptions, higher producer prices, and tighter financial conditions would prolong stagflationary pressures," he added.
A more drawn-out conflict in the Middle East could also see inflation spike by as much as 5.6 percent, the ADB said Friday.
Completed in March, the bank's report had predicted price jumps of 3.6 percent in 2026 and 3.4 percent in 2027 under what it dubbed an "early stabilisation scenario".
Park noted that Iran's squeeze on shipping in the Strait of Hormuz had ripple effects far beyond the gas pump, including regional food security.
"Although rice prices still remain relatively low … high fertiliser and diesel prices raise agricultural costs, which could lead to less input use and lower yields later in the year, and that could contribute to food insecurity," Park said.
In Manila on Friday lines stretched around the block in some neighbourhoods as residents flocked to take advantage of a government-backed programme providing rice for just 20 pesos (33 cents) per kilo.
The new ADB report also said continued trade uncertainty in the face of US President Donald Trump's tariff regime could be expected to weigh on regional investment.
Global powerhouse China was expected to see growth dip to 4.6 percent this year and 4.5 percent next, down from five percent, on the back of continued weakness in its property market and slower export growth, the report said.
