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Economic pickup is to spur Bangladesh's GDP growth to 4.8 per cent this fiscal year and to an impressive 6.3 per cent next, the World Bank says, also dispelling fears of export loss following the country's LDC graduation.
In its Bangladesh Development Update, published Tuesday in Dhaka, the Bank says Bangladesh's forthcoming graduation from the least-developed-country status in 2026 may not adversely affect export performance immediately due to pivot from the European Union's (EU) preferential tariff continuation until 2029.
"LDC graduation would be an opportunity to carry out comprehensive reforms to expand trade, strengthen private-sector competitiveness, and promote economic diversification," says the global multilateral development financier in development update.
On the overall economic front, the Washington-based lender has projected a little bit better advances for Bangladesh both for the current and upcoming fiscals.
Bangladesh's gross domestic product (GDP) can grow at a 4.8-percent rate in the current fiscal year (FY) 2025-26 compared to a weaker rate of 4.0 per cent in the past FY.
And it also forecasts an impressive 6.3-percent GDP growth for the next fiscal year (FY2026-27), based on the potential growth in consumption and ease of inflation.
For the expected upward growth trajectory, the WB, however, stresses urgent reforms to sustain growth and job creation-especially for youth and women.
Policy clarity and accelerated reforms following the election could support a faster-than-expected growth rebound, job creation, and poverty reduction, it notes.
The update report says, "Real GDP is projected to increase by 4.8 per cent in FY2026, an improvement from FY2025 but still below its past 10-year average of 6.3 per cent. The increase is anticipated to be supported by a gradual recovery in private consumption as inflationary pressures ease."
About investment, the WB development update says private-investment growth is expected to recover only marginally to 1.9 per cent in FY2026, remaining well below its last decade's average of 7.4 per cent.
"Persistent policy uncertainty surrounding the national election and fragilities in the banking sector are likely to weigh on private-sector activity. Similarly, public-investment growth is expected to remain subdued ahead of the election and in light of the authorities' intent to implement development projects more prudently."
Export growth should stay robust despite global tariff uncertainty. From FY2027, growth is expected to accelerate with investment rebounds.
However, downside risks have increased materially: further banking-sector weakness, heightened political instability around the election, shortfalls in reform implementation, international trade disruptions from policy uncertainty, persistent inflation, and energy-supply constraints could all weigh on the economic outlook.
Labour-market conditions are projected to improve modestly in FY2026, with household labour income rising by almost 3.0 per cent.
About Bangladesh's poverty situation, the Development Update of the WB forecasts the national poverty rate to decline to 19.1 per cent in the current FY2026 and 18.1 per cent in next FY2027 from 21.2 per cent in FY2025.
Poverty increased between 2023 and 2024, and labour-force participation fell from 60.9 to 58.9 per cent, with women being disproportionately affected. Of the three million additional working-age people outside the labour force, 2.4 million were women, the WB report says.
Inequality is expected to narrow slightly to a Gini index of 33.2. Yet, the recovery is likely to remain fragile, as many households will continue to face financial stress despite modest improvements in jobs and incomes.
The development update says external pressures eased in FY25 as a market-based exchange rate was adopted, foreign-exchange reserves stabilised, the current-account deficit narrowed, and exports grew robustly.
Inflation moderated on the back of tight monetary policy, lower essential-food-import duties, and strong harvests. However, the fiscal deficit widened amid weak tax revenue and higher subsidies and interest payments, it observes.
Asked about LDC graduation and impact on Bangladesh, Franziska Ohnsorge, World Bank Chief Economist for South Asia, said, "You have to tap the under-tapped potential of the country and need to open up the market reducing the current higher tariff than global average."
The WB Chief Economist has also suggested improving the revenue-to-GDP ratio. With effective implementation of the authorities' critical reform initiatives, it is projected to improve gradually.
Hailing the interim government's reform initiatives, the WB economist said in response to fiscal pressures, the stand-in government initiated significant revenue reforms, including the institutional separation of tax policy and administration, the adoption of a policy to improve management of tax expenditures, and the mandatory implementation of online tax filing for individual taxpayers.
"To ensure a strong growth path and more and better jobs, Bangladesh needs bold reforms and faster implementation to address enhanced domestic revenue mobilization, banking-sector vulnerabilities, reduce energy subsidies, plan urbanization, and improve the investment climate," said Jean Pesme, WB Division Director for Bangladesh and Bhutan.
The WB development update has also emphasis on pragmatic urbanisation and regional parity, as, over the past two decades, Bangladesh has witnessed significant shifts in the geography of employment, population growth, and infrastructure development, with industrial jobs increasingly concentrated in Dhaka and Chattogram.
The Bank calls for an urgent rethink of spatial development strategies with a focus on reducing regional disparities as way of supporting inclusive job creation nationwide.
The WB also unveiled the South Asia Development Update, a twice-yearly report, on Tuesday in Dhaka that examines economic developments and prospects in the region and analyzes policy challenges countries face.
The October 2025 edition of the Development Update titled 'Jobs, AI, and Trade' shows growth in South Asia to be robust at 6.6 per cent in this FY2026-but a significant slowdown looms on the horizons.
The report examines how reforms to promote trade openness and AI adoption could help the region create jobs and catalyze growth.
"South Asia has enormous economic potential and is still the fastest-growing region in the world. But countries need to proactively address risks to growth," said Johannes Zutt, World Bank Vice President for South Asia.
The Chief Economist for South Asia, Ms Franziska Ohnsorge, notes the region's high tariffs protect sectors where employment opportunities are shrinking. On the other hand, sectors with lower tariffs, such as services, have accounted for three-quarters of employment growth during the past decade.
The report also recommends harnessing the potential of AI to boost productivity and incomes. South Asia's workforce has limited exposure to AI adoption due to the predominance of low-skill, agricultural and manual jobs.