In a sharp downgrade, the Asian Development Bank (ADB) now expects Bangladesh’s economy to grow by just 3.9% in the current fiscal year 2024–25 – down from 5.1% in its September 2024 forecast and a steep drop from 6.6% projected in April 2024.
The ADB also warns that the 12-month average inflation in Bangladesh is expected to accelerate further to 10.2% in FY25, from 9.7% in FY24 and 9.0% in FY23 with supply-side disruption and higher import costs due to currency depreciation.
The report titled “Asian Development Outlook (ADO) April 2025,” released today (09 April), also states that the enduring inflation remains a significant hurdle due to market inefficiency brought on by regulatory shortcomings, restrained competition in wholesale markets, insufficient market information, supply chain constraints, and depreciation of the taka.
Despite the gloomy short-term outlook, the ADB forecasts a modest recovery in the next fiscal year (FY26), with the country’s GDP growth expected to pick up to 5.1% and inflation to ease to 8%.
This rebound is expected to be driven by rising domestic demand, easing inflation, and stronger remittance inflows, which would boost both private consumption and investment.
The report highlighted that, “Imports are expected to increase with the central bank lifting restrictions on letters of credit, and export growth will accelerate on expected recovery in the European Union, a major destination for Bangladesh’s exports. Net exports are thus likely to add marginally to growth.”
Meanwhile, the ADB expected, on the supply side, higher growth in industry and services is expected to contribute to growth recovery.
It said, “Industrial output is expected to expand as investor confidence is anticipated to improve ahead of elections scheduled between December 2025 and June 2026 and due to the interim government’s implementation of the reform program.”
“As recommended by a task force on Re-strategizing the Economy and Mobilizing Resources for Equitable and Sustainable Development, reform will enhance the business environment by increasing transparency in public procurement, streamlining regulations to promote entrepreneurship and foreign investment, and implementing targeted policies to address urgent food and energy security concerns.”
“Improvement in household purchasing power and an increase in election-related spending will expand service output, and agriculture growth is expected to increase marginally, assuming normal weather.”
The ADB also mentioned some downside risks to the outlook.
It said “Higher election-related spending and subsidies could raise inflation and the fiscal deficit. Growth could be hit by persistently high inflation, prolonged monetary tightening, or a drop in official remittance inflows due to political uncertainty or inadequate exchange rate adjustment. Unpredictable weather is a perennial risk.”
“The effect of reciprocal tariffs imposed by the US on Bangladeshi exports and a possible economic slowdown in major export destinations may affect growth prospects.”
Earlier in January, the World Bank projected that Bangladesh’s economic growth would slow to 4.1% in the current fiscal year 2024–25. In October last year, the IMF also slashed its forecast for Bangladesh’s growth to 4.5%.
Meanwhile, in December last year, the government revised its GDP growth projection for FY25 downward to 5.25%, from the initial estimate of 6.75%, due to the ongoing financial crisis, business slowdown, and political volatility following the recent change in government.
ADB sees growth declining for Asia and the Pacific
Economies in developing Asia and the Pacific are projected to grow 4.9% this year, down from 5.0% last year.
Solid domestic demand and strong global appetite for semiconductors driven by the artificial intelligence boom are supporting growth, but higher US tariffs and trade uncertainty will act as a headwind.
Regional growth is expected to decline further to 4.7% next year.
Inflation is projected to moderate to 2.3% this year and 2.2% next year as global food and energy prices continue to decline.
South Asia is set to remain the fastest-growing subregion, with robust domestic demand boosting growth in several economies this year.
Growth in the subregion is expected to rise from 5.8% in 2024 to 6.0% in 2025 and 6.2% in 2026.
In India, the largest economy in South Asia, growth is projected to accelerate to 6.7% in fiscal year (FY) 2025 and 6.8% in FY2026.
Falling inflation, monetary policy easing, improved agricultural production boosting rural income, and more favorable fiscal policy including tax cuts for middle-income households will support domestic demand.
In South Asia, inflation is expected to decline notably. The subregion’s inflation is forecast to decrease from 6.6% in 2024 to 4.9% in 2025, and further to 4.5% in 2026.