Dhaka:Deepening energy sector bottlenecks, along with vulnerabilities in the financial sector and weak revenue mobilization, are significantly hindering Bangladesh's economic growth. The World Bank has projected a sluggish growth rate of 3.4 percent for fiscal years 2026 and 2027.
According to United News of Bangladesh, the World Bank's latest Bangladesh Development Update highlights that persistent energy shortages, elevated inflation, reduced investment, and a decline in export momentum are diminishing household purchasing power and increasing business operational costs.
The report suggests that GDP growth may slightly improve to 3.9 percent in fiscal year 2028. However, this improvement depends on easing energy supply constraints and accelerating government reforms.
Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, emphasized the need for rapid and bold reforms in the banking sector, domestic revenue mobilization, and energy sector to prevent economic downturn and foster inclusive growth driven by private investment. Pesme urged immediate action to protect the poor and create more jobs.
The report presents a bleak outlook on Bangladesh's social and financial metrics for fiscal year 2026, noting that slow job creation and increasing living costs have pushed approximately 2.1 million more people into poverty compared to the previous year. The banking sector's vulnerabilities have worsened, with the non-performing loan ratio rising to 33.2 percent in June 2026 from 30.6 percent in December 2025.
Additionally, Bangladesh's tax-to-GDP ratio is among the lowest globally at 8.3 percent, limiting fiscal space and increasing the fiscal deficit to 3.9 percent of GDP in fiscal year 2026 from 3.5 percent in fiscal year 2025.
To mitigate the impact on vulnerable populations, the report recommends optimizing social safety net programs. The World Bank points out that nearly half of the poorest households are currently excluded from social protection coverage. Expanding the government's 'Dynamic Social Registry,' consolidating food subsidies, and improving the 'Family Card' system could potentially lift an additional 2.85 million people out of poverty.
The Bangladesh Development Update was released alongside the World Bank's South Asia Economic Update, which forecasts South Asia's overall regional growth at 6.9 percent this year, slowing to 6.7 percent in 2027. World Bank Vice President for South Asia Johannes Zutt and Chief Economist for Asia Franziska Ohnsorge highlighted the transformative potential of Artificial Intelligence for the region, urging South Asian nations to address infrastructure and skill gaps to leverage AI for enhancing labor productivity, export opportunities, and public service delivery.