World Bank Keeps Bangladesh FY27 Growth Forecast at 3.4%

The World Bank has projected Bangladesh's GDP growth at 3.4% in FY27, unchanged from its FY26 forecast, before growth accelerates to 3.9% in FY28, according to its Bangladesh Development Update released on Tuesday (6 October).

The latest forecasts represent downward revisions of 1.2 percentage points for FY27 and 0.5 percentage points for FY26.

Bangladesh's economic growth has slowed since 2023 as persistent structural constraints, including vulnerabilities in the energy and financial sectors and weak domestic revenue mobilisation, along with global uncertainties, continue to weigh on investment and economic activity, the World Bank said.

The update said investment activity had weakened, exports had lost momentum and elevated inflation had reduced household purchasing power while increasing business costs.

"Financial sector weaknesses continued to affect credit intermediation and investor confidence, while limited fiscal space constrained public investment," the report said.

Despite these challenges, the external sector remained resilient, supported by strong remittance inflows and improving foreign exchange reserves.

The World Bank said GDP growth could improve to 3.9% in FY28 if energy supply gradually improves and the government's reform efforts accelerate.

"To avert economic downturn and return to an inclusive growth path, driven by private investment, fast and bold reforms are needed in the banking sector, domestic revenue mobilisation and energy sector," said Jean Pesme, World Bank division director for Bangladesh and Bhutan.

"The country needs to respond with urgency and speed up the reforms essential for protecting the poor and creating more and better jobs. The time to act is now," he said.

Poverty, jobs and banking sector

According to the update, poverty and inequality increased in Bangladesh in FY26, with around 2.1 million more people living in poverty than the previous year.

Job creation has stalled, while women have lost jobs, the report said.

The banking sector also remained under significant strain. The non-performing loan ratio rose to 33.2% in June 2026 from 30.6% in December 2025.

Revenue collection stood at 8.3% of GDP, among the lowest levels globally, limiting the government's ability to increase public spending where needed.

The fiscal deficit widened to 3.9% of GDP in FY26 from 3.5% in FY25.

The World Bank said social protection, energy subsidies and agricultural subsidies help protect poor and vulnerable households. However, around half of the poorest households remain outside social protection programmes.

It said better targeting could significantly improve the impact of social protection programmes and ensure that limited public resources reach those most in need.

The report identified implementation and expansion of the government's Dynamic Social Registry as critical to addressing gaps in targeting and coverage.

Analysis cited in the report suggests that consolidating multiple food subsidies and combining the Family Card with better-targeted existing cash programmes could lift an additional 2.85 million people out of poverty.

South Asia outlook

The Bangladesh Development Update was released alongside the World Bank Group's South Asia Economic Update, which examines economic prospects and policy priorities across the region.

South Asia's growth is expected to reach 6.9% this year, supported by strong domestic demand, before slowing to 6.7% in 2027 as external headwinds increase.

"South Asia has demonstrated remarkable resilience in a challenging global environment. But the region needs to invest in new drivers of growth to sustain momentum and create more jobs," said Johannes Zutt, World Bank vice president for South Asia.

The report also examined the potential of artificial intelligence to create new sources of growth in the region.

AI adoption in South Asia remains well below levels in advanced economies, but businesses are increasingly using the technology to identify new market opportunities, while governments are applying AI to public services.

"AI adoption has the potential to transform South Asia's development trajectory by boosting labour productivity, expanding export opportunities and improving public service delivery," said Franziska Ohnsorge, World Bank Group chief economist for Asia.

She said governments would need to address foundational gaps in skills, infrastructure and the broader enabling environment to fully benefit from AI.