World Bank slashes Bangladesh growth forecast to 4% for FY25

Bangladesh's economy is expected to grow 4 percent in the current fiscal year ending in June 2025, said the World Bank (WB) by revising its previous forecast on 'significant uncertainties around the political and economic outlook following the recent political turmoil.'

The Washington-based multilateral lender had earlier projected a 5.7 percent growth for FY 2024-25. 

The WB also lowered its estimate for Bangladesh's economic growth in FY24 to 5.2 percent, notably lower than the government's provisional estimate of 5.82 percent for the previous fiscal year.

"The wide range of growth projections reflects the lack of reliable data in recent months, as well as the significant uncertainties surrounding the political and economic outlook following the recent political unrest," the WB said in its October 2024 South Asia Development Update released today.

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These revised projections for FY24 and FY25 would mark the lowest growth rates since FY20 when Bangladesh's economy expanded by only 3.45 percent due to the Covid-19 pandemic's severe impact.

The WB's forecast is considerably lower than the 6.75 percent growth target set by the previous Awami League government for FY 2024-25.

"In the short term, political uncertainties are expected to suppress investment and industrial growth. Additionally, recent floods are likely to modestly affect agricultural production," the report added.

The WB also highlighted that an interim government took office after the resignation of the former prime minister Sheikh Hasina on August 8, 2024, amid widespread student-led protests.

In the medium to long term, the WB expects growth to gradually recover, supported by key reforms in the financial sector, increased domestic resource mobilisation, an improved business climate, and expanded trade.

For FY 2025-26, the WB forecasts Bangladesh's economy to grow by 5.5 percent.

Bangladesh is one of two South Asian countries, along with the Maldives, for which the WB has downgraded growth projections.

This revision comes just two weeks after the Asian Development Bank (ADB) lowered its growth forecast for Bangladesh to 5.1 percent for the current fiscal year, citing supply chain disruptions caused by political unrest in July and August 2024.