Only four months ago, in January, the World Bank projected a more hopeful 4.1% growth. However, that optimism has now faded, battered by a toxic mix of falling investments, persistently high inflation, financial sector instability, and deepening political uncertainty
Infographics: TBS
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Infographics: TBS
In a move that has rattled policymakers in Dhaka, the World Bank has sharply downgraded Bangladesh’s economic growth forecast, predicting a mere 3.3% GDP growth for the fiscal 2024-25, ending on 30 June. This sobering estimate marks the slowest growth rate in 36 years.
Only four months ago, in January, the World Bank projected a more hopeful 4.1% growth. However, that optimism has now faded, battered by a toxic mix of falling investments, persistently high inflation, financial sector instability, and deepening political uncertainty.
The downgrade is more than an academic adjustment – it signals a worsening human crisis. Behind every percentage point in GDP lies millions of livelihoods under threat, and for Bangladesh, the story is turning darker.
Poverty on rise as economic struggles deepen
The World Bank’s Macro Poverty Outlook, published today (23 April) as part of its South Asia Development Update, presents an alarming scenario: between FY24 and FY25, millions of Bangladeshis are expected to slide into extreme poverty, living on less than $2.15 per day.
“High inflation and job losses have severely impacted welfare, especially for low-income households. In the first half of FY25, nearly 4% of workers lost their jobs, while wages fell by 2% for low-skilled workers and 0.5% for high-skilled workers,” the report states.
According to the Washington-based lender, extreme poverty is set to rise to 9.3% in FY25, up from 7.7% the previous year, pushing 3 million more people into economic hardship.
Inequality, already on an upward trajectory for several years, is expected to worsen, with projections indicating a rise of one full Gini point. While remittance-receiving households may experience some relief, the majority – three in five families – are likely to deplete their savings to cope with economic shocks.
The Gini index, which measures income disparity on a scale of 0 to 1, indicates rising inequality, where 0 signifies perfect equality and 1 represents extreme wealth concentration.
Political uncertainty, global risks weigh on growth prospects
The World Bank also warns that domestic political instability and global trade policy uncertainty could further weaken investment, exports, and overall economic growth. However, some external pressures have eased, with signs of narrowing balance-of-payment deficits and stabilising foreign exchange reserves.
“Downside risks to the outlook have increased substantially. Political instability ahead of the elections, international trade disruptions, weak reform implementation, persistent inflation, seasonal energy shortages, and banking sector vulnerabilities could further drag economic activity,” the report cautions.
Challenges and priorities for interim govt
Bangladesh’s economic hurdles, as outlined by the World Bank, mirror on-the-ground realities, according to Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD).
He acknowledged that the grim forecast aligns with current macroeconomic conditions but noted that improvements in data integrity have helped paint a clearer picture.
“The economy has faced tremendous challenges, particularly over the past year,” he said, highlighting political uncertainties that have stifled investment flows, slowed growth, and limited job creation.
However, he identified high inflation as the single most damaging factor, warning that it has severely eroded purchasing power, particularly for low-income and vulnerable households.
Despite progress in poverty reduction, many Bangladeshis remain highly vulnerable. “Just two days without work could push as many as 2 million people into poverty,” Prof Mustafiz cautioned.
Looking ahead, he urged the interim government to prioritise inflation control, stating that monetary and fiscal tools must be deployed more effectively. However, he warned that the central bank cannot afford to lower the current 10% policy rate while inflation remains elevated.
Stimulating investment – both public and private – is vital for job creation and growth, but lowering the cost of doing business is equally important, according to Prof Mustafiz. Issues such as transport, logistics, and the business climate must be urgently addressed.
With the FY2025-26 budget set to be announced next month, he also urged a comprehensive review of the country’s social safety net programmes to ensure better targeting, inclusion, and transparency.
Brighter prospects for FY25-26?
Despite the gloomy current outlook, the World Bank projects Bangladesh’s GDP growth will recover to 4.9% in FY26, buoyed by critical reforms. Inflation is also expected to decline to 7.7%, down from a peak of 10% in the current fiscal year.
The World Bank remains the most pessimistic among international lenders. Just a day earlier, the International Monetary Fund forecasted 6.5% growth, with inflation dropping to 5.2%. Similarly, the Asian Development Bank recently projected a 5.1% growth rate, with inflation estimated at 8%.
South Asia’s growth prospects dim amid global uncertainty
Across South Asia, economic growth forecasts have weakened as global uncertainties weigh on regional economies.
The World Bank’s regional outlook suggests South Asia’s growth rate will slow to 5.8% in 2025 – 0.4 percentage points lower than earlier predictions – before rebounding to 6.1% in 2026.
Martin Raiser, World Bank vice president for South Asia, highlighted the need for urgent structural reforms, stating, “Multiple shocks over the past decade have left South Asian nations with limited buffers to withstand economic volatility.
“To ensure resilience, the region must open to trade, modernise agriculture, and unlock private sector dynamism.”