Deepening energy sector bottlenecks, alongside financial sector vulnerabilities and weak revenue mobilization, continue to severely drag down Bangladesh's economic momentum, the World Bank said on Tuesday, projecting a sluggish growth rate of 3.4 percent for FY26 and FY27.
In its latest Bangladesh Development Update released today, the global lender cautioned that persistent energy supply shortages—coupled with elevated inflation, softening investment, and loss of export momentum—are squeezing household purchasing power and driving up business operational costs.
The report noted that GDP growth could marginally recover to 3.9 percent in FY28, but emphasized that this turnaround hinges critically on a gradual easing of energy supply constraints and an accelerated government reform agenda.
“To avert economic downturn and return to an inclusive growth path, driven by private investment, fast and bold reforms are needed in banking sector, domestic revenue mobilization, and energy sector,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.
“The country needs to respond with urgency and speed up the reforms essential for protecting the poor and creating more and better jobs. The time to act is now,” Pesme added.
The report paints a grim picture of the country's social and financial metrics for FY26. Driven by sluggish job creation and rising living costs, about 2.1 million additional people slipped into poverty compared to last year. Banking sector vulnerabilities intensified further, with the non-performing loan (NPL) ratio climbing to 33.2 percent in June 2026, up from 30.6 percent in December 2025.
Additionally, Bangladesh’s tax-to-GDP ratio remains among the lowest in the world at 8.3 percent, constraining the government’s fiscal space and widening the fiscal deficit to 3.9 percent of GDP in FY26 from 3.5 percent in FY25.
To cushion the impact on vulnerable populations, the report recommended optimizing social safety net programs. The World Bank highlighted that nearly half of the poorest households currently remain outside social protection coverage. It noted that expanding and implementing the government’s 'Dynamic Social Registry', consolidating food subsidies, and refining the 'Family Card' system could pull an additional 2.85 million people out of poverty.
The Bangladesh Development Update was released alongside the World Bank’s regional report, the South Asia Economic Update, which projected South Asia’s overall regional growth at 6.9 percent this year, slowing to 6.7 percent in 2027.
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