Bangladesh’s economy is heading towards its weakest growth in nearly four decades, with the International Monetary Fund (IMF) projecting GDP expansion of just 3.2 per cent in the current fiscal year while inflation is expected to climb to 10.9 per cent, intensifying pressure on an economy struggling to regain momentum.
The IMF’s latest World Economic Outlook, published on Tuesday lowered its growth forecast for Bangladesh by 1.1 percentage points from its April projection of 4.3 per cent, signalling a more difficult economic outlook amid persistent price pressures.
The projected growth would be the lowest since FY1988-89, when the economy expanded by 3.11 per cent, according to Bangladesh Bureau of Statistics (BBS) data.
Even during the Covid-19 pandemic, GDP grew by 3.45 per cent in FY2019-20.
The IMF’s latest estimate is also below those of other major development lenders.
The World Bank has projected 3.4 per cent growth for FY2026-27, while the Asian Development Bank (ADB) expects the economy to expand by 4 per cent.
The fund has also sharply revised its inflation outlook, raising its forecast for average inflation in FY27 from 6 per cent in April to 10.9 per cent. Its July growth projection stood at 3.5 per cent.
The combination of slowing growth and accelerating inflation points to mounting challenges for economic management, household purchasing power and the country’s recovery prospects.
According to IMF estimates, Bangladesh’s economy grew by 3.6 per cent in FY2025-26, following 3.5 per cent growth in the preceding fiscal year.
Against this backdrop, Finance Minister Amir Khosru Mahmud Chowdhury has sought support from development partners, particularly the IMF and the World Bank, during the IMF-World Bank Group Annual Meetings in Bangkok. He met IMF Executive Director Urjit Patel and World Bank Managing Director of Operations Anna Bjerde on Tuesday.
The latest projections have placed Bangladesh’s economic outlook, reform programme and financing needs in focus at the meetings. The IMF also forecast growth of 7 per cent for India and 6.9 per cent for Bhutan in FY27.
Echoes of FY1988-89
The projected slowdown recalls FY1988-89, when Bangladesh’s economy was smaller, heavily dependent on agriculture and grappling with severe natural disasters and political instability.
According to the IMF’s 1995 country report, drawing on BBS data and staff estimates, GDP at current prices stood at Tk68,790 crore in FY1988-89. Agriculture contributed Tk23,630 crore, manufacturing Tk7,290 crore and services Tk3,327 crore.
The economy faced widespread poverty, limited industrialisation, weak domestic revenue mobilisation and dependence on foreign assistance. Jute and traditional industries remained important, while the readymade garment sector was still emerging as a major export industry.
IMF estimates at the time put average real GDP growth at 3.1 per cent over FY1986-87 to FY1988-89, while average inflation stood at 9.9 per cent. The budget deficit averaged 7.6 per cent of GDP over the same period.
Economic difficulties were compounded by devastating floods in August and September 1988. The World Bank’s report Bangladesh: Recent Economic Developments and Short-Term Prospects, published in March 1989, said the floods submerged 84 per cent of the country’s land area and directly affected 45 million people.
More than 1,600 deaths were directly attributed to the flooding, while another 735 people subsequently died from diarrhoeal diseases.
Crops, livestock, homes and infrastructure suffered extensive damage, disrupting economic activity and increasing the need for relief and rehabilitation.
Political instability added to the uncertainty. Bangladesh was then under President Hussain Muhammad Ershad, who had seized power in a military coup in March 1982.
Although martial law was lifted in November 1986, opposition parties continued to challenge his government’s democratic legitimacy.
Ershad’s Jatiyo Party won 251 of the 300 parliamentary seats in the March 1988 election, which the Awami League, the BNP and other opposition groups boycotted over allegations of electoral fraud.
Parliament subsequently passed the Eighth Amendment to the Constitution in June 1988, making Islam the state religion.
Opposition to Ershad intensified in the following years, culminating in a mass uprising that forced him to resign on 6 December 1990. Bangladesh held parliamentary elections in February 1991 under an interim government.
While the economic and political circumstances differ, the latest IMF forecast highlights the scale of Bangladesh’s present challenge: restoring growth while containing inflation and strengthening economic resilience.