ADB Cuts Bangladesh Growth Forecast to 3.7pc, Sees Inflation Stuck at 9pc

The Asian Development Bank (ADB) has sharply downgraded Bangladesh's economic growth forecast, warning that weak exports, sluggish private investment, stubbornly high inflation and mounting global uncertainties will significantly slow the country's recovery, with growth projected at just 3.7 per cent in fiscal year (FY) 2025-26 before edging up to 4.5 per cent in FY2026-27.
In its latest Asian Development Outlook (July 2026) released on Thursday, the Manila-based lender said Bangladesh's economy is facing growing headwinds as weaker-than-expected export earnings, subdued private investment, elevated energy costs and persistent inflation continue to undermine economic momentum.
The ADB expects inflation to remain entrenched at 9.0 per cent in FY2025-26, unchanged from its April projection, as recent increases in domestic prices of petroleum products, natural gas and electricity continue to feed through to transport costs, utility charges and consumer prices.
Although inflation is forecast to ease marginally to 8.8 per cent in FY2026-27, the bank cautioned that the pace of disinflation will remain slow, driven by higher energy and transport costs, exchange-rate pass-through effects and persistent second-round inflation in food and services.
"Despite tight macroeconomic conditions, Bangladesh's economy is expected to maintain positive growth in FY2025-26, supported by robust remittance inflows, a resilient services sector and targeted credit support for priority industries," the ADB said.
However, it warned that persistently high inflation is eroding household purchasing power, dampening private consumption and discouraging investment, while weak exports and only modest import growth reflect subdued global demand and fragile business confidence.
On the production side, export-oriented manufacturing is expected to remain under pressure due to high energy prices, weakening global demand and longstanding structural bottlenecks. Agriculture also faces downside risks from fertiliser shortages, although the services sector is expected to remain the economy's principal growth driver, buoyed by remittance-fuelled household spending.
Akira Matsunaga, Officer-in-Charge of the ADB's Bangladesh Resident Mission, said the country's economy had shown resilience despite challenging domestic and international conditions, thanks largely to strong remittance inflows and the continued stability of the services sector.
"A stronger and more inclusive recovery will require sustained reforms to reinforce macroeconomic stability, improve the investment climate, strengthen governance in the financial sector, and remove energy and infrastructure bottlenecks," he said.
He added that accelerating these reforms would be crucial to attracting private investment, creating quality employment and enhancing Bangladesh's long-term economic resilience.
Looking ahead to FY2026-27, the ADB expects lower inflation, simplified business regulations, stronger financial sector governance, improved tax administration and continued incentives for remittance inflows to provide modest support for consumption and investment.
Nevertheless, it warned that structural weaknesses in the banking sector, persistent energy shortages and declining competitiveness could continue to constrain economic expansion.
The report also identified significant downside risks to the outlook.
An escalation of conflict in the Middle East could drive up global energy and shipping costs, intensifying inflationary pressures, weakening growth and slowing remittance inflows. A further spike in international oil prices would increase Bangladesh's import bill and place additional strain on public finances through higher energy subsidies.
The ADB further cautioned that higher tariffs, expanding trade restrictions or slower growth in major economies could further suppress export demand and prolong the slowdown in manufacturing.
Persistent exchange-rate pressures, tighter global financing conditions and climate-related shocks remain among the most significant threats to Bangladesh's medium-term economic outlook, the report concluded.