The Asian Development Bank (ADB) has lowered its economic growth forecast for Bangladesh to 4.0% for fiscal year (FY) 2027 from 4.5% projected in its July outlook, while forecasting 3.7% growth for FY2026.

According to the Asian Development Bank’s (ADB) latest report, the Asian Development Outlook (ADO) September 2026, released on Wednesday, Economic activity slowed in the final quarter of FY2026 due to supply chain disruptions linked to the conflict in the Middle East, although the impact is expected to be limited.

The improved growth outlook reflects stronger consumption and investment as political uncertainty eases following the general election in early 2026.

Inflation eased to an estimated 8.7% in FY2026 from 10.0% in FY2025, but is forecast to rise to 9.0% in FY2027.

Inflation is expected to remain elevated due to energy shortages, high production and transport costs, potential shipping disruptions, the delayed effects of El Niño on food prices, and gradually easing monetary conditions.

The current account deficit is projected to widen to 0.6% of GDP in FY2027 from an estimated 0.3% in FY2026, as import growth outpaces exports.

Remittance inflows are expected to remain resilient despite ongoing tensions in the Middle East.

Strong remittances and higher foreign exchange reserves will help support external stability, although maintaining stability will depend on adequate financial inflows, exchange rate flexibility, and prudent macroeconomic management.

The report notes that the services and agriculture sectors are expected to support growth in FY2027.

However, industry and investment are likely to remain constrained by high borrowing costs, limited access to credit, energy shortages, weak external demand, and other structural challenges.

Private consumption, supported by remittances, is expected to remain the main driver of growth, although high inflation will continue to reduce household purchasing power.

The report projects significant downside risks.

A prolonged conflict in the Middle East, higher oil prices, further disruptions to global shipping, tighter trade restrictions, weaker growth in major export markets, continued exchange rate pressures, additional stress in the banking sector, delays in fiscal reforms, lower-than-expected development spending, and climate-related shocks could weaken growth and keep inflation elevated.

ADB Country Director Qingfeng Zhang said Bangladesh’s economy is beginning to recover, but the recovery remains vulnerable to external shocks and domestic constraints.

“This is an important moment to accelerate reforms in macroeconomic management, the financial sector, energy security, and the business environment. These reforms will be essential to unlock private investment, create quality jobs, and place Bangladesh on a stronger, more inclusive, and resilient growth path”.

He mentioned that ADB stands ready to support Bangladesh in translating these reforms into tangible results for its people.