Dhaka: Consumption and investment in Bangladesh are projected to grow moderately, driven by strong remittance inflows.
According to Bangladesh Sangbad Sangstha, this trend may be partially offset by contractionary monetary and fiscal policies, as well as investor caution, as indicated by the Asian Development Bank (ADB).
The ADB's latest report, the Asian Development Outlook (ADO) April 2025, highlights that global tariff increases are expected to impact Bangladesh's exports and economic growth over time. The report also notes that services growth may slow due to political uncertainty, financial sector vulnerability, and reduced household purchasing power. Agricultural growth is likely to moderate after repeated floods, while industry growth is anticipated to improve modestly with a rebound in manufacturing supported by export growth.
The Bangladesh chapter of the report was launched at the ADB's Bangladesh Resident Mission in Dhaka's Agargaon area. During the event, ADB Country Director for Bangladesh Hoe Yun Jeong delivered the opening and closing remarks and answered questions from reporters. ADB Country Economist Chandan Sapkota provided a power-point presentation.
The report forecasts Bangladesh's gross domestic product (GDP) to grow by 3.9% in the fiscal year 2025, rising to 5.1% in FY2026. In comparison, India's GDP is expected to grow at 6.7% in FY2025, while Pakistan's is projected at 2.5%.
Despite growth in Bangladesh's garment exports, the slower growth forecast reflects weaker domestic demand amid political changes, natural disaster risks, industrial unrest, and high inflation. Bangladesh's economic growth was 4.2% in FY2024.
ADB Country Director Hoe Yun Jeong stated, "Despite external and domestic headwinds, Bangladesh's economy remains resilient, which can be fortified by implementing crucial structural reforms." He emphasized the need for Bangladesh to diversify its economy beyond the readymade garments sector, foster private sector development, enhance resilient infrastructure, improve energy security, strengthen financial sector governance, and attract foreign investment to accelerate growth, create jobs, and boost competitiveness.
Inflation is forecast to accelerate from 9.7% in FY2024 to 10.2% in FY2025 due to stifled competition in wholesale markets, inadequate market information, supply chain constraints, and the depreciation of the taka. The current account deficit is anticipated to shrink from 1.4% of GDP in FY2024 to 0.9% in FY2025 as the trade deficit narrows and remittances rise.
The growth forecasts were finalized before the 2 April announcement of new tariffs by the US administration, so the baseline projections only reflect previously existing tariffs. However, the ADO April 2025 report includes an analysis of how higher tariffs may affect growth in Asia and the Pacific.
Chandan Sapkota, during his presentation, emphasized that reforms in investment policy and a business-friendly environment are critical to attracting investment, boosting competitiveness, and ensuring smooth and sustainable graduation from the list of Least Developed Countries (LDC). He noted that the current deficit is expected to further narrow in FY2025 and FY2026, driven by an improving trade balance and strong remittance inflows.
Highlighting that downside risks remain elevated, Sapkota warned that the full implementation of the US tariffs announced in early April and further US trade policy shifts could worsen the outlook, with large uncertainties looming.
The ADB Country Economist also stressed the need for streamlined reform to attract Foreign Direct Investment (FDI) and boost private investment, suggesting the simplification of licensing and business procedures, improved inter-agency and policy coordination, leveraging the Bangladesh Investment Climate Improvement Program (BICIP) to cut red tape, and enhancing regulatory transparency. He also recommended joining the WTO's Investment Facilitation for Development to guide reforms and empowering the Bangladesh Investment Development Authority (BIDA) to lead on policy coherence and signal investment readiness.
Working with its members and partners to solve complex challenges, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard the planet. Founded in 1966, ADB is owned by 69 members, 49 of which are from the region.