World Bank and IMF Cut Bangladesh Growth Forecasts to Around 3%

Bangladesh's growth outlook has weakened further after the World Bank and the International Monetary Fund both lowered their projections for the current and upcoming fiscal years. The World Bank now expects real GDP growth of 3.4 percent in both FY26 and FY27, while the IMF places the figure closer to 3.2 percent for the current fiscal year. These forecasts sit well below the government's official target of around 6.5 percent and mark the latest in a series of downward revisions by major development partners.

The revised numbers reflect a combination of domestic structural pressures that have proven more persistent than earlier anticipated. Energy shortages remain a central constraint. Intermittent gas and electricity supplies have forced many factories to cut production hours or operate below capacity, raising costs and discouraging new investment. At the same time, the banking sector continues to struggle with a high volume of non-performing loans—reported at roughly one-third of total outstanding credit—and cautious lending practices. Private-sector credit growth has already fallen to multi-decade lows, limiting the funds available for factory expansion, machinery purchases, and working capital.

Fiscal constraints add another layer of difficulty. Domestic revenue collection remains low by regional standards, while subsidy and interest payments have pushed the fiscal deficit higher. This tighter fiscal space reduces the government's room to support demand through public investment or targeted spending. Inflation, projected by the IMF to average about 10.9 percent in the current fiscal year, continues to erode household purchasing power and compress business margins, further dampening consumption and investment decisions.

Despite these headwinds, the external sector has shown relative resilience. Strong remittance inflows have supported private consumption and helped stabilize foreign-exchange reserves. However, these inflows have not been sufficient to offset the weakness in private investment and industrial output. As a result, overall growth momentum remains subdued. The World Bank expects only a modest recovery to around 3.9 percent in FY28, contingent on gradual improvements in energy supply and faster progress on structural reforms.

Poverty trends have also deteriorated. Recent World Bank assessments indicate that the number of people living in poverty rose by roughly two million in the most recent fiscal year, with further increases possible in the current year if real incomes fail to keep pace with elevated prices. Labor-market conditions are expected to remain muted, with limited new job creation in the near term.

Both the World Bank and the IMF have emphasized that restoring stronger growth will require decisive action in three priority areas: cleaning up and strengthening the banking system, securing more reliable energy supplies, and raising domestic revenue collection. Without measurable progress on these fronts, private investment is likely to stay cautious, job creation limited, and the economy's medium-term potential constrained. The latest forecasts highlight the urgency of addressing these structural bottlenecks if Bangladesh is to move beyond its current low-growth trajectory and return to a more robust expansion path.