Bangladesh’s economic growth is expected to remain sluggish, according to the World Bank. The international lender projects the country’s gross domestic product (GDP) growth at 3.4 percent in fiscal years 2026 and 2027. Growth could improve to 3.9 percent in FY2028.

The outlook was presented in the World Bank’s Bangladesh Development Update for October 2026, released on Tuesday (October 6). The report is titled “Make Subsidies and Social Protection Work Better for the Poor.”

The World Bank lowered its growth forecast for FY2027 by 1.2 percentage points from its previous estimate. Its forecast for FY2026 was also cut by 0.5 percentage points.

According to the World Bank, Bangladesh’s economic growth has been slowing since 2023. Weaknesses in the energy and financial sectors, shortfalls in domestic revenue mobilisation and global uncertainty have put pressure on investment and overall economic activity.

The report said investment has weakened, export growth has slowed and high inflation has reduced people’s purchasing power. At the same time, the cost of doing business has increased.

The World Bank said weaknesses in the financial sector are negatively affecting credit flows and investor confidence. Limited revenue capacity is also constraining public investment. However, the external sector has remained relatively stable due to strong remittance inflows and an improvement in foreign exchange reserves.

Jean Pesme, World Bank Country Director for Bangladesh and Bhutan, said rapid and significant reforms in the banking sector, domestic revenue mobilisation and the energy sector are needed to avoid an economic downturn and return the country to a path of inclusive growth.

According to the report, poverty and inequality increased in Bangladesh in FY2026. Around 2.1 million people fell into poverty compared with the previous year. At the same time, job creation stagnated and women lost employment.

Weaknesses in the banking sector also intensified. The non-performing loan ratio rose from 30.6 percent in December 2025 to 33.2 percent in June 2026. Revenue collection stood at 8.3 percent of GDP, among the lowest levels in the world. The fiscal deficit widened to 3.9 percent of GDP in FY2026, up from 3.5 percent in the previous fiscal year.

The World Bank said social protection programmes, energy subsidies and agricultural subsidies are supporting poor people. However, nearly half of the poorest households remain outside any social protection programme.

Meanwhile, the World Bank forecasts South Asia’s economic growth at 6.9 percent this year, slowing to 6.7 percent in 2027. The institution said the use of artificial intelligence (AI) could create new opportunities for economic growth in the region.