ADB Cuts Bangladesh Growth Forecast to 4.0% for FY 27

by Siddique Islam September 24, 2026

By Siddique Islam September 24, 2026 0 comments 3 minutes read

Courtesy: X@ADB_HQ

The Asian Development Bank (ADB) has cut its growth forecast for Bangladesh’s economy to 4.0 per cent for fiscal year 2026–27, from 4.5 per cent projected in July, citing persistent banking-sector stress and structural constraints.

The Manila-based development partner also warned that severe energy shortages, banking-sector stress and persistent inflationary pressures will continue to constrain the country’s economic growth through FY2027.

Meanwhile, the Bangladesh government has set a 6.5 per cent GDP growth target for fiscal year 2026–27, 2.5 percentage points above the ADB’s latest forecast of 4.0 per cent in its Asian Development Outlook (ADO) September report released on Wednesday.

Growth will remain constrained by banking-sector stress and structural bottlenecks, as high non-performing loans, weak bank balance sheets, preference for safer government securities and high borrowing costs limit private-sector credit, according to the ADO.

At the same time, unreliable energy supply, logistics constraints, and lengthy regulatory and approval procedures limit investment demand and the economy’s response to any monetary easing or fiscal impulse.

“Bangladesh’s economy is beginning to recover, but the recovery remains vulnerable to external shocks and domestic constraints,” ADB Country Director Qingfeng Zhang said in a statement.

This is an important moment to accelerate reforms in macroeconomic management, the financial sector, energy security, and the business environment, according to the country director.

“These reforms will be essential to unlock private investment, create quality jobs, and place Bangladesh on a stronger, more inclusive, and resilient growth path” Mr. Zhang said, adding that ADB stands ready to support Bangladesh in translating these reforms into tangible results for its people.

The inflation is expected to remain elevated due to energy shortages, high production and transport costs, potential shipping disruptions, the delayed effects of El Niño on food prices, and gradually easing monetary conditions, the ADB explained.

Although the inflation eased to an estimated 8.7 per cent in FY2026 from 10.0 per cent in FY2025, but it is forecast to rise to 9.0 per cent in the current FY2027, according to the ADO.

Bangladesh’s current account deficit is projected to widen to 0.6 per cent of GDP in FY2027 from an estimated 0.3 per cent a year before, as import growth outpaces exports.

The ADB also said the flow of inward remittances are expected to remain resilient, supporting external stability alongside higher foreign exchange reserves, although this will depend on adequate financial inflows, exchange-rate flexibility and prudent macroeconomic management.

However, services and agriculture are expected to support growth in FY2027, while industry and investment will remain constrained by high borrowing costs, limited credit, energy shortages, weak external demand and other structural challenges.

Private consumption, supported by remittances, is expected to remain the main growth driver despite persistent inflationary pressure on household purchasing power, the ADB noted.

The outlook faces significant downside risks, including prolonged Middle East conflict, higher oil prices, global shipping disruptions, tighter trade restrictions, weaker export-market growth, exchange-rate pressures, banking-sector stress, delays in fiscal reforms, lower development spending and climate shocks, which could weigh on growth and keep inflation elevated.