DHAKA, April 23, 2025—The World Bank has released its latest Bangladesh Development Update, which paints a picture of economic slowdown for Bangladesh amid growing global economic uncertainties. With a notable drop in export growth and low investment levels contributing to a slowdown in fiscal year 2024 (FY24), the country's growth prospects are expected to improve in the medium term, according to the twice-annual report.
The report highlights key economic developments and forecasts for Bangladesh, with a particular emphasis on financial sector stability. Real GDP growth fell from 5.8 percent in FY23 to 4.2 percent in FY24, and economic activity slowed further in FY25. Challenges persist, including moderate investment, high inflation, and vulnerabilities within the financial sector. Nevertheless, strong remittance inflows and export performance have provided some relief to the external sector, helping to stabilize the current account balance in FY25.
For fiscal year 2025 (FY25), the report predicts a further decline in real GDP growth to 3.3 percent, owing to reduced private and public investments. Political uncertainties and rising costs tied to borrowing and inputs are expected to hinder private investment growth, suppressing industrial growth. Public investment is anticipated to decline as the government curtails capital expenditures. Meanwhile, the fiscal deficit is projected to stay below 5 percent of GDP in the medium term, with a gradual increase in capital expenditures. Inflation is expected to remain high in the short term.
World Bank Vice President for South Asia Martin Raiser stated, "Multiple shocks over the past decade have left South Asian countries with limited buffers to withstand an increasingly challenging global environment. The region needs targeted reforms to strengthen economic resilience and unlock faster growth and job creation. Now is the time to open to trade, modernize agricultural sectors, and boost private sector dynamism."
Gayle Martin, World Bank Interim Country Director for Bangladesh, emphasized the necessity for Bangladesh to implement significant reforms, noting, "Bangladesh will need bold and urgent reforms to bolster the financial sector, facilitate trade, and enhance domestic revenue mobilization."
The report forecasts a gradual rise in real GDP in the medium term if essential reforms are implemented. Inflation is expected to decrease gradually through tight monetary policy and fiscal consolidation, coupled with easing import restrictions on key food commodities. However, rising trade uncertainties are likely to exert pressure on the external sector.
World Bank Senior Economist and report co-author, Dhruv Sharma, warned, "The risks to the outlook are on the downside as uncertainties related to trade, persistent inflationary pressure, weak demand in Bangladesh's major export markets, and intensifying financial sector vulnerabilities could weigh on growth."
The Bangladesh Development Update complements the South Asia Development Update, also from the World Bank, which examines regional economic prospects and policy challenges. The April 2025 edition, "Taxing Times," projects regional growth to slow to 5.8 percent in 2025, a revision down by 0.4 percentage points from projections made in October. The report points to domestic vulnerabilities such as limited fiscal space, as well as inefficiencies in tax policy and administration as areas for potential improvement to enhance resilience in a challenging global economic environment.