Bangladesh’s GDP Growth to Decline to 4.1% in FY25: WB

Bangladesh's economic growth is projected to slow to 4.1% in the current fiscal year (FY25), marking the weakest pace since the pandemic, as political turmoil in mid-2024 eroded investor confidence and dampened economic activity, the World Bank reported on Thursday.

In its latest Global Economic Prospects report, the global lender warned that heightened political uncertainty would keep investment and industrial activity subdued in the near term. The slowdown follows two consecutive years of deceleration, with the World Bank estimating FY24 growth at 5%.

This estimate contrasts with provisional data from the Bangladesh Bureau of Statistics (BBS), which pegged FY24 growth at 5.82%, though the final figures remain pending.

"Supply constraints, including energy shortages and import restrictions, weakened industrial activity and intensified price pressures," the report stated. "High inflation further eroded household purchasing power, curbing growth in the services sector."

Despite the grim short-term outlook, the World Bank expressed cautious optimism for the medium term, forecasting GDP growth to recover to 5.4% in FY26, contingent on political stability, financial sector reforms, improved business conditions, and increased trade. Easing inflation is also expected to bolster private consumption.

However, the immediate challenges remain stark. Recent BBS data revealed a significant slowdown across agriculture, industry, and services—the three pillars of Bangladesh's GDP—in the first quarter of FY25. Provisional figures indicate GDP growth plummeted to 1.81% in the July-September period, the slowest in nearly four years, compared to 6.04% in the same quarter last fiscal year.

Adding to the concerns, the government recently revised its FY25 GDP growth projection downward to 5.25% from the initial target of 6.75%.

South Asia is expected to maintain robust growth, averaging 6.2% in 2025-26, driven primarily by resilient activity in India. Excluding India, regional growth is forecast at 4% in 2025 and 4.3% in 2026, with Bangladesh's economic challenges contributing to a downward revision.

India’s growth is projected to remain steady at 6.7% annually over the next two fiscal years, supported by sustained expansion in services and strengthening manufacturing activity driven by government reforms.

Pakistan’s growth is expected to recover to 2.8% in FY25 and 3.2% in FY26, aided by moderating inflation and improved business confidence. Meanwhile, Sri Lanka is forecast to grow by 3.5% in 2025 and 3.1% in 2026, supported by industrial activity and remittance inflows.

Tourism is expected to underpin growth in Bhutan, Maldives, and Nepal, while Afghanistan is likely to see modest expansion despite heightened unemployment and food insecurity.

The World Bank noted that developing economies, which drive 60% of global growth, face the weakest long-term growth prospects since 2000. Global GDP is forecast to grow by 2.7% annually in 2025 and 2026, with developing economies expected to expand at a slower pace of around 4%.

While the global economy is stabilizing, the report highlighted that growth in developing nations remains insufficient to significantly reduce poverty or achieve broader development goals. Major risks include policy uncertainty, trade disruptions, higher commodity prices, and climate-related challenges.

On the upside, stronger-than-expected growth in major economies could boost global demand, offering some relief to struggling nations.