World Bank calls for urgent reforms in Bangladesh as FY26 growth is projected to slow to 3.9%

The World Bank published its Bangladesh Development Update projecting a marked slowdown in growth and warning that persistent inflation, rising poverty, weak revenue mobilization, subdued private investment, and banking-sector stress are constraining the economy’s ability to absorb external shocks, including from the conflict in the Middle East. The report calls for urgent policy and institutional reforms to restore macroeconomic stability, strengthen the financial sector, boost revenues, and improve the business environment to support job creation. Growth is projected to slow to 3.9% in FY26, with inflation at 8.5% and wages for low-income workers not keeping pace with prices. The national poverty rate is estimated to have risen to 21.4% in 2025 from 18.7% in 2022, adding 1.4 million people to poverty in 2025, while the number projected to exit poverty this year falls to 0.5 million from a pre-conflict estimate of 1.7 million. Financial vulnerabilities remain elevated, with the non-performing loan ratio at 30.6% in December 2025 and aggregate capital adequacy below the regulatory minimum; the update also notes a tax-to-GDP ratio falling below 7% in FY25 for the first time in 15 years and highlights targeted deregulation, stronger competition policy, competitive neutrality for state-owned enterprises, streamlined trade policies, and improved electricity reliability as priorities. The Bangladesh update is presented as a companion to the World Bank Group’s South Asia Economic Update, which expects regional growth to slow to 6.3% in 2026 from 7% in 2025 before recovering to 6.9% in 2027, and includes an assessment of South Asia’s mixed results from industrial policy.