Bangladesh economic growth projected at 5pc in 2026

Bangladesh’s economic outlook for 2026 reflects a balance between moderate growth potential—estimated at around 5 per cent—and persistent structural challenges, with inflation expected to ease gradually, according to the Economic Update & Outlook (January) published by the Planning Ministry.

The report, published by the General Economics Division (GED) of the Bangladesh Planning Commission, said sustaining growth will depend on stronger governance, policy consistency and increased investment in skills and technology to reduce over-reliance on the readymade garment sector.

These reforms are seen as crucial as Bangladesh moves closer to graduating from least developed country status and navigates a democratic transition, reports UNB.

The GED stressed that political stability, institutional reforms and effective use of technology are essential to shift the economy from a low-cost labour model to higher value-added activities.

It cautioned that uncertainty among economic elites and weaknesses in institutions remain major risks to long-term growth.

As progress towards the Sustainable Development Goals (SDGs) remains slow, the publication suggested that evidence-based policymaking, supported by village-level interventions, could help achieve sustainable development outcomes at the local level.

General inflation rose further in December 2025 to 8.49 per cent from 8.29 per cent in November, driven by accelerating food prices amid persistently high non-food inflation.

Food inflation increased from 7.36 per cent to 7.71 per cent during the period, while non-food inflation remained elevated at 9.13 per cent. Although rice inflation continued its downward trend across all categories, rice prices remained high and continued to exert significant pressure on overall food inflation.

Overall rice inflation declined from 12.26 per cent in November to 11.92 per cent in December, with medium rice inflation easing from 10.96 per cent to 10.48 per cent, fine rice from 15.43 per cent to 14.84 per cent, and coarse rice from 11.04 per cent to 10.92 per cent.

The contribution of rice to food inflation fell from 40.28 per cent in November to 37.34 per cent in December. In contrast, the contribution of fish and dry fish rose sharply from 40.77 per cent to 43.34 per cent, making it the largest contributor to food inflation during the month.

Vegetables continued to exert a strong disinflationary effect, with their negative contribution deepening from -17.37 per cent to -20.33 per cent. Onion shifted from a negative to a positive contribution, while potato remained a major disinflationary factor.

Price inflation outpaced wage growth in December, widening the gap between the two. While price inflation rose by 0.20 percentage points, wage inflation increased marginally from 8.04 per cent to 8.07 per cent.

This divergence indicates growing pressure on household purchasing power, as nominal wage growth failed to keep pace with rising prices.

According to provisional quarterly national accounts estimates from the Bangladesh Bureau of Statistics (BBS), real economic growth in Q1 of FY2025-26 rose to 4.50 per cent, up from 2.58 per cent in the same quarter of the previous fiscal year.

Overall GDP growth at constant prices reached 3.72 per cent in FY2024-25, based on provisional estimates.

Sectoral data showed broad-based improvement. Agricultural growth turned positive at 2.3 per cent after contracting in Q1 of FY2024-25. Industrial growth accelerated sharply from 3.59 per cent to 6.97 per cent, while services sector growth improved from 2.96 per cent to 3.67 per cent, supported by transport, accommodation and information services.

The share of agriculture in GDP declined to 9.84 per cent, while the industrial sector’s share increased to 38.34 per cent, indicating a gradual structural shift towards industry.

Bank deposits continued to grow in October and November, with year-on-year growth reaching 10.8 per cent in November. Public sector credit expanded rapidly, rising to 23.24 per cent in November, reflecting higher government borrowing.

Private sector credit growth remained modest at 6.58 per cent, indicating subdued private investment.

For FY2025-26, the revised revenue target was set at Tk 554,000 crore. In December 2025, revenue collection stood at Tk 36,191 crore, falling short of the revised monthly target by Tk 15,174 crore, although collections improved significantly compared to November and year-on-year.

The Revised Annual Development Programme (RADP) for FY2025-26 was finalised at Tk 200,000 crore, down from Tk 230,000 crore in the original ADP, reflecting fiscal pressures and implementation performance.

Allocations increased in sectors with stronger execution capacity, including Environment, Forestry and Water Resources (up 20.36 per cent) and Local Government and Rural Development (up 12.40 per cent). In contrast, major cuts were made to health, transport, education and energy sectors.

Despite the reduced allocation, the number of approved projects increased, indicating a broader but more tightly funded development programme.

Foreign exchange reserves strengthened in the first half of FY2025-26, with gross reserves rising to USD 33.19 billion in December 2025. Remittance inflows also grew robustly, reaching USD 3.22 billion in December, supported by regulatory incentives and a more favourable exchange rate regime.

Export earnings showed signs of stabilisation, averaging around USD 4.0 billion per month, with the ready-made garment sector remaining the dominant contributor. Import payments remained volatile, while capital machinery imports stayed subdued, reflecting weak private investment sentiment.

The exchange rate remained broadly stable in December, with easing appreciation pressures observed in real effective exchange rate (REER) terms.