The Asian Development Bank (ADB) has downgraded its forecast for Bangladesh’s economic growth to 5.1% for the current fiscal year, primarily attributing this revision to supply disruptions caused by political unrest in July and August 2024.
"Additionally, fiscal and monetary policies are expected to remain tight, further dampening consumption and investment demand. The forecast is highly uncertain as significant downside risks cloud the macroeconomic outlook," the ADB stated in its recently released Asian Development Outlook.
It had previously projected that Bangladesh’s gross domestic product (GDP) would expand by 6.6% in the fiscal year 2024-25.
ADB explained that the adjustment also considers the impact of recent flooding, adding to the country’s economic challenges.
The Manila-based lender highlighted that these risks are largely driven by ongoing political instability, a fragile law-and-order situation, and vulnerabilities within the financial sector.
The latest forecast is notably lower than the World Bank’s June projection, which estimated Bangladesh’s economic growth at 5.7% for FY2025, supported by increased private consumption due to easing inflation and a rise in investment linked to large infrastructure projects.
ADB further noted that demand remains suppressed by high inflation, restrictive global monetary conditions, and other macroeconomic challenges.
"Inflation has remained high due to elevated commodity and energy prices and currency depreciation. The current account deficit narrowed as both exports and imports declined," the ADB report stated.
The organisation warned that inflation could potentially rise to double digits if corrective measures are not implemented.
"Restoring and maintaining macroeconomic stability will depend on accelerated reforms to increase revenue for a better fiscal balance, stabilise the financial sector through improved interest and exchange rate policies, and diversify the economy," the ADB added.
Despite persistent inflation, continued pressure on external accounts, import contraction, and sluggish private investment, Bangladesh's growth remained below 6% in the last two fiscal years, recording 5.78% in FY2023 and 5.82% in FY2024.
The government had earlier set a GDP growth target of 6.75% for FY2025, a figure economists have described as overly ambitious given the ongoing economic difficulties.
