The World Bank released its Bangladesh Development Update, warning that Bangladesh is facing slowing growth, persistent inflation and rising poverty alongside a stressed banking sector, weak revenue mobilization and subdued private investment, with the conflict in the Middle East adding material external headwinds. The report projects growth to slow to 3.9% in FY26 and notes that thin foreign exchange buffers, tight fiscal and monetary conditions, and financial-sector fragilities limit the country’s ability to absorb a prolonged shock, particularly for vulnerable households. Inflation is estimated at 8.5% in FY26, while the national poverty rate rose to 21.4% in 2025 from 18.7% in 2022, adding 1.4 million more poor people in 2025; the report also revises down the number of people projected to exit poverty this year from 1.7 million to 0.5 million due to the conflict. Financial vulnerabilities remain elevated, with the non-performing loan ratio at 30.6% in December 2025 and aggregate capital adequacy falling below the regulatory minimum, leaving several banks with limited loss-absorbing capacity. The update notes that a more flexible exchange rate regime adopted in mid-2025 helped stabilize the taka and rebuild reserves, but points to ongoing external and investment vulnerabilities and highlights that the tax-to-GDP ratio fell below 7% in FY25 for the first time in 15 years. It calls for urgent policy and institutional reforms to restore macroeconomic stability, strengthen the financial sector, boost revenues, and improve the business environment, including targeted deregulation, stronger competition policy, competitive neutrality for state-owned enterprises, streamlined trade policies, and improved electricity reliability; it also notes that sustained political stability after the 2026 elections and rapid progress on structural reforms could support a stronger recovery. The update is published alongside the World Bank Group’s South Asia Economic Update, which forecasts regional growth slowing to 6.3% in 2026 from 7% in 2025 before recovering to 6.9% in 2027, and includes analysis suggesting South Asia’s industrial policy measures have delivered mixed results despite being used at roughly twice the rate of other emerging economies.
World Bank 2026-04-08
World Bank Bangladesh Development Update projects FY26 growth slowing to 3.9% and highlights banking sector stress and conflict-related risks
The World Bank’s Bangladesh Development Update warns of slowing growth, persistent inflation, rising poverty and elevated financial-sector vulnerabilities, with growth projected at 3.9% and inflation at 8.5% in FY26. It cites a non-performing loan ratio of 30.6% in December 2025, bank capital adequacy below regulatory minimums, a tax-to-GDP ratio under 7% in FY25, and urges urgent macroeconomic, financial-sector, revenue and business-environment reforms. Released alongside the South Asia Economic Update, it says regional growth will slow to 6.3% in 2026 from 7% in 2025 before recovering to 6.9% in 2027, and that South Asia’s industrial policy has yielded mixed results.