The Asian Development Bank (ADB) has sharply revised down its growth forecast for Bangladesh, now projecting the country’s economy to expand by just 3.9% in the fiscal year 2024–25. This represents a significant reduction from the 5.1% forecast issued in September 2024 and a steep decline from the 6.6% projection made in April 2024.
In addition, the ADB warns that Bangladesh’s annual average inflation is expected to rise further, reaching 10.2% in FY25, up from 9.7% in FY24 and 9.0% in FY23. The escalation is attributed to supply chain disruptions and increased import costs due to the depreciation of the taka.
The findings, published in the “Asian Development Outlook (ADO) April 2025” report, highlight persistent inflation as a key challenge. This issue is exacerbated by regulatory inefficiencies, limited competition in wholesale markets, insufficient market data, supply chain constraints, and currency depreciation.
Outlook and Economic Recovery
Despite the challenging near-term outlook, the ADB anticipates a modest economic recovery in the following fiscal year (FY26), forecasting GDP growth to rise to 5.1% while inflation is expected to ease to 8%.
The projected rebound is underpinned by increased domestic demand, lower inflation, and stronger remittance inflows, which are expected to bolster private consumption and investment. Furthermore, the ADB notes that imports are set to rise following the central bank’s easing of restrictions on letters of credit, while export growth is expected to accelerate due to a recovery in the European Union, a key market for Bangladesh’s exports.
On the supply side, higher growth in both the industrial and services sectors is expected to drive the economic recovery. The ADB predicts that industrial output will expand as investor confidence improves ahead of the national elections scheduled between December 2025 and June 2026. Additionally, the interim government’s implementation of economic reforms is expected to enhance the business environment by increasing transparency in public procurement, simplifying regulations to encourage entrepreneurship and foreign investment, and addressing food and energy security concerns.
Furthermore, household purchasing power is anticipated to improve, supported by election-related spending, which will contribute to growth in the services sector. Meanwhile, agricultural growth is expected to increase slightly, assuming normal weather conditions.
Potential Risks to Growth
The ADB also outlined several downside risks to its outlook. It cautioned that increased election-related expenditure and subsidies could lead to higher inflation and a widening fiscal deficit. Economic growth may also be adversely affected by prolonged inflation, extended monetary tightening, or a decline in official remittance inflows, particularly if political uncertainty persists or exchange rate adjustments remain inadequate. Additionally, unpredictable weather patterns pose a perennial risk to economic stability.
The report also warns that the imposition of reciprocal tariffs by the United States on Bangladeshi exports, as well as a potential economic slowdown in key export markets, could weigh on growth prospects.
Earlier this year, the World Bank forecast that Bangladesh’s economic growth would slow to 4.1% in FY25. In October 2024, the International Monetary Fund (IMF) also reduced its growth projection for Bangladesh to 4.5%. In December, the Bangladeshi government revised its own GDP growth estimate for FY25 downwards to 5.25%, from the initial 6.75%, citing ongoing financial difficulties, a slowdown in business activity, and political volatility following recent governmental changes.
Regional Economic Trends
The ADB also reported a downward revision in growth forecasts for Asia and the Pacific, projecting economic expansion of 4.9% in 2025, down from 5.0% in the previous year. While strong domestic demand and robust semiconductor demand, driven by the artificial intelligence boom, continue to support growth, higher US tariffs and ongoing trade uncertainties are expected to pose challenges.
Regional economic growth is projected to slow further to 4.7% in 2026. Meanwhile, inflation across developing Asia is expected to moderate to 2.3% in 2025 and 2.2% in 2026, reflecting a continued decline in global food and energy prices.
South Asia remains the fastest-growing subregion, with growth expected to increase from 5.8% in 2024 to 6.0% in 2025 and 6.2% in 2026, supported by strong domestic demand in several economies. In India, the region’s largest economy, growth is forecast to accelerate to 6.7% in FY25 and 6.8% in FY26. Factors such as declining inflation, monetary policy easing, improved agricultural output, and tax cuts for middle-income households are expected to stimulate domestic demand.
Inflation in South Asia is forecast to decrease significantly, falling from 6.6% in 2024 to 4.9% in 2025, and further to 4.5% in 2026, as economic conditions stabilise and price pressures ease.
