Bangladesh’s economy is projected to grow by 3.7% in fiscal year (FY) 2026 and 4.0% in FY2027, up from 3.5% in FY2025, according to the Asian Development Bank’s (ADB) latest report, the Asian Development Outlook (ADO).

Economic activity slowed in the final quarter of FY2026 due to supply chain disruptions linked to the conflict in the Middle East, although the impact is expected to be limited. The improved growth outlook reflects stronger consumption and investment as political uncertainty eases following the general election in early 2026.

“Bangladesh’s economy is beginning to recover, but the recovery remains vulnerable to external shocks and domestic constraints,” said ADB Country Director Qingfeng Zhang. “This is an important moment to accelerate reforms in macroeconomic management, the financial sector, energy security, and the business environment. These reforms will be essential to unlock private investment, create quality jobs, and place Bangladesh on a stronger, more inclusive, and resilient growth path”. “ADB stands ready to support Bangladesh in translating these reforms into tangible results for its people,” Mr. Zhang added.

Inflation eased to an estimated 8.7% in FY2026 from 10.0% in FY2025, but is forecast to rise to 9.0% in FY2027. Inflation is expected to remain elevated due to energy shortages, high production and transport costs, potential shipping disruptions, the delayed effects of El Niño on food prices, and gradually easing monetary conditions.

The current account deficit is projected to widen to 0.6% of GDP in FY2027 from an estimated 0.3% in FY2026, as import growth outpaces exports. Remittance inflows are expected to remain resilient despite ongoing tensions in the Middle East. Strong remittances and higher foreign exchange reserves will help support external stability, although maintaining stability will depend on adequate financial inflows, exchange rate flexibility, and prudent macroeconomic management.

The report notes that the services and agriculture sectors are expected to support growth in FY2027. However, industry and investment are likely to remain constrained by high borrowing costs, limited access to credit, energy shortages, weak external demand, and other structural challenges. Private consumption, supported by remittances, is expected to remain the main driver of growth, although high inflation will continue to reduce household purchasing power.

The outlook faces significant downside risks. A prolonged conflict in the Middle East, higher oil prices, further disruptions to global shipping, tighter trade restrictions, weaker growth in major export markets, continued exchange rate pressures, additional stress in the banking sector, delays in fiscal reforms, lower-than-expected development spending, and climate-related shocks could weaken growth and keep inflation elevated.

ADB is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—50 from the region.