Bangladesh's economic growth is expected to decelerate to 4.1% in the fiscal year 2025 (FY25), marking the slowest expansion since the onset of the pandemic, according to the World Bank.
In its latest Global Economic Prospects report, released on Thursday (16 January), the World Bank attributed the downturn to the political upheaval in mid-2024, which has eroded investor confidence and hampered economic activity.
The report highlights that heightened political uncertainty is likely to keep investment and industrial activities subdued in the short term.
Growth has already slowed for two consecutive years, with the World Bank estimating a 5% expansion for FY24.
This figure contrasts with provisional data from the Bangladesh Bureau of Statistics (BBS), which reported a growth rate of 5.82%, pending finalisation.
The report notes, "Supply constraints, including energy shortages and import restrictions, weakened industrial activity and led to increased price pressures. High inflation has reduced household purchasing power, thereby slowing growth in the services sector."
Despite the bleak immediate outlook, the World Bank remains cautiously optimistic, projecting a recovery to 5.4% GDP growth in FY26, contingent on political stability, successful financial sector reforms, an improved business environment, and increased trade.
A reduction in inflation is anticipated to boost private consumption.
However, the near-term economic picture remains grim.
Recent data from the BBS show a marked slowdown in Bangladesh's three main GDP components—agriculture, industry, and services—in the first quarter of FY25.
The provisional figures reveal GDP growth at just 1.81% for the July-September period, the slowest pace in nearly four years, sharply down from the 6.04% recorded in the same period last year.
In response, the government revised its GDP growth projection for FY25 downward to 5.25%, from an earlier estimate of 6.75%.
The report anticipates that growth in South Asia will remain robust, averaging 6.2% in 2025-26, driven primarily by resilient activity in India.
Excluding India, regional growth is expected to reach 4% in 2025 and 4.3% in 2026, though projections for Bangladesh have been revised downward due to economic and policy uncertainties.
In India, growth is projected to remain steady at 6.7% annually for the two fiscal years beginning in April 2025, supported by a sustained expansion in the services sector and strengthened manufacturing activity.
Investment growth is expected to hold steady, with moderating public investment counterbalanced by rising private investment.
Growth in Pakistan is expected to strengthen to 2.8% in FY25 and 3.2% in FY26, supported by moderating inflation and improved business confidence.
In Sri Lanka, growth is forecasted at 3.5% in 2025 and 3.1% in 2026, bolstered by industrial activity and remittance recoveries.
The global economy is projected to grow by 2.7% in both 2025 and 2026, maintaining the pace of 2024 as inflation and interest rates decline.
However, developing economies, which account for 60% of global growth, are forecasted to finish the first quarter of the 21st century with the weakest long-term growth outlook since 2000.
Despite stabilisation in the global economy, developing nations are likely to progress more slowly in narrowing the income gap with advanced economies, with growth expected to hold steady at around 4% over the next two years, insufficient for significant poverty alleviation or broader development goals.
