Friday, 10 October, 2025
Bangladesh’s economy rebounded strongly in the latter half of FY25, buoyed by robust export growth, record remittance inflows, and a recovery in foreign exchange reserves following early-year disruptions, according to a new World Bank report released on Tuesday.
The Bangladesh Development Update, published twice annually, paints a cautiously optimistic picture, projecting that the country will maintain an upward growth trajectory over the next few years. The report forecasts GDP growth rising from 4.0 percent in FY25 to 4.8 percent in FY26, and further to 6.3 percent in FY27, provided current reforms are sustained.
While the World Bank report highlights progress in stabilizing external balances and moderating inflation, economists caution that rising government borrowing poses new risks to macroeconomic stability.
“Higher public borrowing is beginning to squeeze credit to the private sector — the main driver of growth,” said Finance Adviser Dr. Salehuddin Ahmed, who also warned that the government has already crossed the external borrowing ceiling set by the International Monetary Fund (IMF).
“We have exceeded the ceiling — around $4 billion additional funds have been used. But overall, we have shown progress,” Dr. Salehuddin told reporters after a meeting of the Advisers Council Committee on Government Purchase held at the Secretariat on Tuesday.
He acknowledged that concerns raised by development partners about debt sustainability were “understandable” and stressed the need for prudent fiscal management to maintain investor confidence and external support.
According to the World Bank, external pressures eased in FY25 following the adoption of a market-based exchange rate, which helped stabilize reserves and narrow the current account deficit.
Inflation, which spiked earlier in the fiscal year, began to moderate due to tighter monetary policy, reduced import duties on essential foods, and strong agricultural output. However, fiscal challenges persisted — with weak tax collection, higher subsidies, and rising interest payments contributing to a widening budget deficit.
Despite the rebound, the report warns that the recovery has not yet translated into improved employment or poverty outcomes. Poverty rates increased between 2023 and 2024, while labor force participation fell from 60.9 to 58.9 percent, driven largely by declining participation among women.
Of the three million working-age people who exited the labor force, 2.4 million were women, raising concerns about the inclusiveness and sustainability of Bangladesh’s post-crisis recovery.
“The economy has shown resilience, but this cannot be taken for granted,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan. “To ensure a strong growth path and more and better jobs, Bangladesh needs bold reforms — faster implementation on domestic revenue mobilization, banking sector reform, energy subsidy rationalization, urban planning, and investment climate improvement.”
The report also traces Bangladesh’s evolving economic geography, noting that industrial employment has become increasingly concentrated in Dhaka and Chattogram, exacerbating regional disparities.
It calls for a “rethinking of spatial development strategies” to ensure more balanced job creation and inclusive growth across the country.
Over the past two decades, rapid urbanization and infrastructure expansion have transformed Bangladesh’s economic landscape — but the benefits have not been evenly distributed, the report cautions.
The Bangladesh Development Update was released alongside the South Asia Development Update, titled “Jobs, AI, and Trade”, which highlights regional growth and reform challenges.
The World Bank projects South Asia’s growth at 6.6 percent in 2025, maintaining its position as the world’s fastest-growing region. However, the report warns that the momentum could fade unless countries address productivity bottlenecks, trade barriers, and skill mismatches.
“South Asia has enormous economic potential,” said Johannes Zutt, World Bank Vice President for South Asia. “But countries must proactively mitigate risks to growth. By promoting AI adoption and lowering trade barriers — especially for intermediate goods — they can boost productivity, spur private investment, and generate more jobs.”
The report emphasizes that South Asia remains among the least open regions to trade and finance globally, with high tariffs protecting uncompetitive sectors and limiting job creation. It recommends sequenced tariff reductions and broader trade agreements to enhance competitiveness.
Furthermore, the World Bank highlights artificial intelligence (AI) as a transformative force that could complement human labor, raise productivity, and open new employment opportunities — provided policies support workers in transitioning to higher-value sectors.
“Increasing trade openness and accelerating AI adoption could be transformative for South Asia,” said Franziska Ohnsorge, the World Bank’s Chief Economist for South Asia. “Policies that help workers move across firms and sectors are crucial to channel resources into productive areas and sustain job creation.”
Bangladesh’s near-term outlook remains broadly positive, underpinned by export recovery and a more stable external sector. Yet, fiscal discipline, structural reforms, and inclusive labor policies will determine whether this rebound evolves into sustainable, broad-based growth.
As the World Bank notes, Bangladesh’s resilience is evident — but without accelerated reform, the country risks losing momentum just as the global economy enters a more uncertain phase.
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Bangladesh’s economy rebounded strongly in the latter half of FY25, buoyed by robust export growth, record remittance inflows, and a recovery in foreign exchange reserves following early-year disruptions, according to a new World Bank report released on Tuesday.
The Bangladesh Development Update, published twice annually, paints a cautiously optimistic picture, projecting that the country will maintain an upward growth trajectory over the next few years. The report forecasts GDP growth rising from 4.0 percent in FY25 to 4.8 percent in FY26, and further to 6.3 percent in FY27, provided current reforms are sustained.
While the World Bank report highlights progress in stabilizing external balances and moderating inflation, economists caution that rising government borrowing poses new risks to macroeconomic stability.
“Higher public borrowing is beginning to squeeze credit to the private sector — the main driver of growth,” said Finance Adviser Dr. Salehuddin Ahmed, who also warned that the government has already crossed the external borrowing ceiling set by the International Monetary Fund (IMF).
“We have exceeded the ceiling — around $4 billion additional funds have been used. But overall, we have shown progress,” Dr. Salehuddin told reporters after a meeting of the Advisers Council Committee on Government Purchase held at the Secretariat on Tuesday.
He acknowledged that concerns raised by development partners about debt sustainability were “understandable” and stressed the need for prudent fiscal management to maintain investor confidence and external support.
According to the World Bank, external pressures eased in FY25 following the adoption of a market-based exchange rate, which helped stabilize reserves and narrow the current account deficit.
Inflation, which spiked earlier in the fiscal year, began to moderate due to tighter monetary policy, reduced import duties on essential foods, and strong agricultural output. However, fiscal challenges persisted — with weak tax collection, higher subsidies, and rising interest payments contributing to a widening budget deficit.
Despite the rebound, the report warns that the recovery has not yet translated into improved employment or poverty outcomes. Poverty rates increased between 2023 and 2024, while labor force participation fell from 60.9 to 58.9 percent, driven largely by declining participation among women.
Of the three million working-age people who exited the labor force, 2.4 million were women, raising concerns about the inclusiveness and sustainability of Bangladesh’s post-crisis recovery.
“The economy has shown resilience, but this cannot be taken for granted,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan. “To ensure a strong growth path and more and better jobs, Bangladesh needs bold reforms — faster implementation on domestic revenue mobilization, banking sector reform, energy subsidy rationalization, urban planning, and investment climate improvement.”
The report also traces Bangladesh’s evolving economic geography, noting that industrial employment has become increasingly concentrated in Dhaka and Chattogram, exacerbating regional disparities.
It calls for a “rethinking of spatial development strategies” to ensure more balanced job creation and inclusive growth across the country.
Over the past two decades, rapid urbanization and infrastructure expansion have transformed Bangladesh’s economic landscape — but the benefits have not been evenly distributed, the report cautions.
The Bangladesh Development Update was released alongside the South Asia Development Update, titled “Jobs, AI, and Trade”, which highlights regional growth and reform challenges.
The World Bank projects South Asia’s growth at 6.6 percent in 2025, maintaining its position as the world’s fastest-growing region. However, the report warns that the momentum could fade unless countries address productivity bottlenecks, trade barriers, and skill mismatches.
“South Asia has enormous economic potential,” said Johannes Zutt, World Bank Vice President for South Asia. “But countries must proactively mitigate risks to growth. By promoting AI adoption and lowering trade barriers — especially for intermediate goods — they can boost productivity, spur private investment, and generate more jobs.”
The report emphasizes that South Asia remains among the least open regions to trade and finance globally, with high tariffs protecting uncompetitive sectors and limiting job creation. It recommends sequenced tariff reductions and broader trade agreements to enhance competitiveness.
Furthermore, the World Bank highlights artificial intelligence (AI) as a transformative force that could complement human labor, raise productivity, and open new employment opportunities — provided policies support workers in transitioning to higher-value sectors.
“Increasing trade openness and accelerating AI adoption could be transformative for South Asia,” said Franziska Ohnsorge, the World Bank’s Chief Economist for South Asia. “Policies that help workers move across firms and sectors are crucial to channel resources into productive areas and sustain job creation.”
Bangladesh’s near-term outlook remains broadly positive, underpinned by export recovery and a more stable external sector. Yet, fiscal discipline, structural reforms, and inclusive labor policies will determine whether this rebound evolves into sustainable, broad-based growth.
As the World Bank notes, Bangladesh’s resilience is evident — but without accelerated reform, the country risks losing momentum just as the global economy enters a more uncertain phase.
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