ADB Cuts Bangladesh FY27 Growth Forecast To 4 Pc Amid Banking Stress: Report

(MENAFN- IANS) New Delhi, Sep 23 (IANS) The Asian Development Bank has trimmed its economic growth forecast for Bangladesh in FY27 to 4 per cent, down from 4.5 per cent in July, citing persistent banking‐sector stress, structural bottlenecks and severe energy shortages, a report has said.

The report from Bangladesh-based The Daily Star said that Manila-based lender cited high non‐performing loans, weak bank balance sheets, elevated borrowing costs and banks' preference for government securities as factors restricting economic growth.

These factors will constrain private‐sector access to credit, while unreliable energy supplies, logistics constraints and lengthy regulatory procedures also weigh on the economy's ability to respond to fiscal stimulus.

“The downgrade for FY2027 reflects trade headwinds, energy import volatility and weather-related disruptions impacting agriculture and output across South Asia,” the ADB said in a statement.

ADB Country Director Qingfeng Zhang said that Bangladesh's economy has started recovery, but the extent is dependent on 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,” Zhang said.

Industrial growth is expected to slow to 3.3 per cent in FY27 over persistent energy shortages, rising production costs, weak external demand and uncertainty weighing on manufacturing and private investment.

The services sector could be the only growing component in the economy, up 4.7 percent, buoyed by solid remittance inflows and a modest pickup in domestic activity.

Average inflation could be more severe at 9 per cent in the fiscal from 8.7 percent in FY2026-higher than previously anticipated 8.8 percent, which could worsen further, due to less restrictive monetary policy stance and expanded liquidity support.

However, the ADB maintained that demand-driven inflationary pressures will be largely contained by subdued economic activity and sluggish credit growth.

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