World Bank Warns Bangladesh Growth Will Stall at 3.4% for a Second Year Running

The World Bank now expects Bangladesh's economy to grow just 3.4 percent in the fiscal year that began in July, the same sluggish pace as the year before and well short of the 5.6 percent average the country managed over the previous decade. The projection, published this week in the World Bank's latest Bangladesh Development Update, points to a banking sector in genuine distress, an energy system leaning harder than ever on imports, and a tax collection machine that is falling further behind its own targets. A modest pickup to 3.9 percent is pencilled in for the following year, but the Bank frames even that as fragile, conditional on reforms that have so far moved slowly.

A Banking Sector the World Bank Calls a Genuine Drag

The report's starkest numbers are about banks. Non-performing loans across the sector had climbed to 33.2 percent of all outstanding credit as of June, and the industry's average capital adequacy ratio had turned negative, at minus 2.6 percent, far below the 10 percent regulators are supposed to require. Private sector credit growth, the fuel that normally lets businesses expand, invest and hire, slowed to just 4.5 percent, which the Bank describes as the weakest pace in 33 years. "Decisive, time-bound action on bank restructuring and NPL resolution is urgently needed," the report states, language that reads less like routine caution and more like a flag that the sector's problems have outgrown gradual fixes.

The figure is close to, though not identical with, the 32.78 percent classified loan ratio Bangladesh Bank itself reported in early October as part of a five year roadmap it presented to parliament for tackling a non-performing loan pile now estimated at roughly Tk6.06 lakh crore. That roadmap leans on a proposed Distressed Asset Management Act that would let licensed private firms buy bad loans directly from banks, alongside the mCapital diaspora investment platform's own distressed asset fund launched in September. Both initiatives suggest domestic policymakers are already alert to the exact problem the World Bank is describing, even if the fixes remain mostly on paper for now.

An Energy Bill That Keeps Growing

Energy supply is the report's second major concern. Domestic natural gas production has been declining, and the country now imports roughly a third of the gas it needs, a dependency that the Bank says disrupts industrial output and discourages the kind of investment that would otherwise lift growth. That finding echoes what trade data has already been showing on the ground: petroleum import costs more than doubled in July and August of this fiscal year alone, becoming the single biggest driver behind a trade deficit that widened 29 percent over the same two months. An economy trying to grow faster while importing an ever larger share of the energy that powers its factories is, in the World Bank's telling, fighting itself.

Weak Revenue, a Widening Deficit

On the fiscal side, the Bank puts revenue collection at just 8.3 percent of GDP, among the lowest ratios anywhere in the world, and projects the budget deficit will widen to 4.8 percent of GDP in the current fiscal year. That matches a pattern Bangladesh's own revenue board has been living through this year, having missed value added tax collection targets in 85 percent of its large taxpayer units in fiscal 2025-26, a roughly Tk20,500 crore shortfall that is now pushing the government toward heavier borrowing from domestic banks to cover the gap.

Poverty Keeps Climbing

Perhaps the most human number in the report is poverty. The World Bank now estimates the national poverty rate at 22.5 percent, up from 18.7 percent in 2022, and projects it will edge higher still, to 22.8 percent, by the end of this fiscal year. The Bank's own Development Updates have charted this climb in real time: an edition a year earlier had already flagged poverty reaching what it called a four year high, attributing the rise to high inflation and declining real wages eroding what households could actually afford, even as it held out hope that the rate could fall back toward 18 to 19 percent if reforms took hold. That more optimistic path has not materialised, and each successive update has recorded poverty higher than the one before it.

Fiscal Year	World Bank (October 2026)	Asian Development Bank (July 2026)
FY2025-26 (actual)	3.4%	3.7%
FY2026-27 (forecast)	3.4%	4.5%
FY2027-28 (forecast)	3.9%	Not yet issued

A Widening Gap Between Forecasters

What stands out alongside the Bank's own numbers is how far they now diverge from other forecasters. The Asian Development Bank, updating its own outlook in July, put Bangladesh's FY27 growth at 4.5 percent, more than a full percentage point above the World Bank's October figure, even though the ADB had itself just cut that number down from an earlier 4.7 percent on the back of "ongoing energy constraints and weaknesses in the financial sector," the same two problems the World Bank is now citing more bluntly. The World Bank's own track record this year tells a similar story of forecasts sliding backward: an April update had projected FY26 growth decelerating to 3.9 percent, which the Bank itself called a third consecutive year of deceleration. The actual outcome came in lower still, at 3.4 percent, meaning growth undershot even the World Bank's own cautious April forecast by half a percentage point.

Taken together, the pattern across institutions and across the year is consistent even where the exact decimal points differ: every fresh look at Bangladesh's economy this year has landed lower than the one before it. Whether the 3.9 percent rebound the World Bank now pencils in for FY28 actually arrives will depend on whether the bank restructuring law parliament is currently reviewing, the energy financing talks a World Bank delegation held in Dhaka earlier this month, and the revenue measures the NBR is under pressure to enforce all move from proposal to practice faster than they have so far. On present form, caution looks like the safer bet.