The World Bank has projected Bangladesh's GDP growth at 3.4% in FY27, unchanged from FY26, before accelerating to 3.9% in FY28, according to its Bangladesh Development Update released on Tuesday (October 6). The forecasts represent downward revisions of 1.2 percentage points for FY27 and 0.5 points for FY26.

Since 2023, Bangladesh's economic growth has been facing a slowdown as persistent structural constraints, including deepening energy sector and financial sector vulnerability and weak domestic revenue mobilisation, along with global uncertainties, weigh on investment and economic activity, the lender said in its new update.

The report highlights that investment activities softened, exports lost momentum, and inflation remained elevated, reducing household purchasing power and raising business costs. Financial sector weaknesses continued to affect credit intermediation and investor confidence, while limited fiscal space constrained public investment. Despite these challenges, the external sector showed resilience, supported by strong remittance inflows and improving foreign exchange reserves.

The World Bank said GDP growth is expected to improve to 3.9% in FY28, if supported by a gradual easing of energy supply and acceleration in the government's reform drive.

"To avert economic downturn and return to an inclusive growth path, driven by private investment, fast and bold reforms are needed in the banking sector, domestic revenue mobilisation 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."

According to the update, in FY26, poverty and inequality increased in Bangladesh, with about 2.1 million more people living in poverty than last year. Job creation has stalled and women have lost jobs, the report states.

Banking sector vulnerabilities intensified, with the non-performing loan ratio increasing to 33.2% in June 2026 from 30.6% in December 2025. Revenue collection at 8.3% of GDP remains among the lowest in the world, constraining public spending where needed. The fiscal deficit widened to 3.9% of GDP in FY26 from 3.5% in FY25.

The World Bank said social protection, energy and agricultural subsidies help protect the poor and vulnerable. However, about half of the poorest households remain outside of any social protection programs. The poverty impact of these programs would be materially improved with better targeting, with implementation and scale-up of the government's Dynamic Social Registry, an integrated system intended to enable evidence-based targeting and continuous enrollment of beneficiaries, seen as critical to address targeting and coverage gaps. Analysis suggests that consolidating multiple food subsidies and combining the Family Card with better targeting of existing cash programs could lift an additional 2.85 million people out of poverty, according to the report.

South Asia Outlook

The Bangladesh Development Update is a companion piece to the South Asia Economic Update, the World Bank Group's regional report that examines economic prospects and policy priorities across South Asia, also released the same day. South Asia's growth is expected to increase to 6.9% this year, with strong domestic demand keeping the region resilient to global shocks. The report projects growth to slow to 6.7% in 2027 as headwinds mount.

"South Asia has demonstrated remarkable resilience in a challenging global environment. But the region needs to invest in new drivers of growth to sustain momentum and create more jobs," said Johannes Zutt, World Bank vice president for South Asia.