ADB cuts Bangladesh growth forecast to 4% for FY27

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Rejaul Karim Byron

The Asian Development Bank (ADB) has trimmed its economic growth projection for Bangladesh for fiscal year 2026–27 to 4 percent, down from its earlier forecast of 4.5 percent made in July, citing persistent banking-sector stress, structural bottlenecks and severe energy shortages.

In its latest Asian Development Outlook (ADO) update, the Manila-based lender warned that economic expansion will remain constrained as high non-performing loans (NPLs), weak bank balance sheets, elevated borrowing costs and banks' preference for safer government securities continue to limit private-sector access to credit.

“The downgrade for FY2027 reflects trade headwinds, energy import volatility and weather-related disruptions impacting agriculture and output across South Asia,” the ADB said in the ADO released today.

Unreliable energy supplies, logistics constraints and lengthy regulatory and approval procedures are further dampening investment demand, restricting the economy's capacity to respond to potential monetary easing or fiscal stimulus.

According to the ADB, industrial growth is projected to slow to 3.3 percent in FY2027 due to persistent energy shortages, rising production costs, sluggish external demand and widespread uncertainty affecting manufacturing and private investment.

Agricultural output is also expected to face headwinds from weather shocks and the limited availability of fertilisers.

Conversely, the services sector is expected to remain a relative bright spot, growing at 4.7 percent, buoyed by solid remittance inflows and a modest pickup in domestic activity.

Inflation to rise on El Niño, supply pressures

On the consumer front, average inflation is forecast to climb to 9 percent in FY2027 from 8.7 percent in FY2026—an upward revision from the 8.8 percent projected in the July update.

The multilateral lender pointed to the lagged effects of a stronger El Niño event, persistent supply-side price pressures stemming from energy shortages, higher transport costs and potential shipping disruptions as key factors driving prices higher.

“Rising global energy and shipping costs have transmitted directly into Bangladesh's domestic market via elevated import prices,” it said.

The ADB said a gradually less restrictive monetary policy stance and expanded liquidity support are also expected to add upward pressure on prices.

However, the ADB noted that demand-driven inflationary pressures will be somewhat tempered by subdued economic activity and sluggish credit growth.

Consumption main driver as investment stays weak

From the demand side, private consumption will remain the primary engine of economic growth, supported by remittance flows, though high inflation will continue to erode household purchasing power.

Private investment is set to stay muted under the weight of financial sector stress, limited access to high-cost credit, energy deficits and low business confidence. While public investment may offer modest support, its impact remains constrained by revenue shortfalls and implementation delays under the Annual Development Programme (ADP).

Exports are projected to recover only gradually amid a challenging global market environment, while imports are set to rise as demand for fuel and industrial production inputs grows.