Bangladesh's economic rebound at risk from US tariffs, election costs, banking woes: ADB
ADB slightly revises down its April forecast, projecting Bangladesh’s FY26 growth at 5%
The Asian Development Bank (ADB) warns that Bangladesh's FY26 economic rebound, following a slow year, could be threatened by new US tariffs, geopolitical tensions, high election-related spending, unsterilised liquidity support to weak banks and persisting banking sector weaknesses.
Even though the ADB has trimmed its growth outlook for Bangladesh, projecting the economy to expand by 5% in FY26 – slightly down from its April estimate of 5.1% – this would still mark the fastest growth in three years, following an estimated sluggish 4% expansion last year.
In its Asian Development Outlook (ADO) September 2025 report released today (30 September), the ADB warned that trade uncertainty from new US tariffs and potential geopolitical tensions could curb export growth, while poor implementation of the managed float exchange rate policy may worsen external imbalances.
Keep updated, follow The Business Standard's Google news channel
In light of these risks, ADB Country Director for Bangladesh Hoe Yun Jeong said, "Future growth will depend on improving the business environment to boost competitiveness and attract investment, and on ensuring reliable energy supplies."
At the same time, inflation is expected to ease to a four-year low, averaging 8% in FY26 compared with 10% last year, though the improvement offers only partial relief.
However, the Manila-based lender flagged that "Despite recent monetary tightening, higher election-related spending and unsterilised liquidity support to weak banks may raise inflation and pressures in the foreign exchange market while weakening governance reform."
It also stated, "Investor confidence should improve with general elections scheduled for February 2026 and ongoing finance sector reform to strengthen the stability, transparency, and efficiency of the finance system."
A 20% tariff on Bangladesh exports to the US
The new tariff will raise average duties on Bangladesh exports to the US from 15% to 35%, with apparel tariffs climbing from 16.8% to 36.8% and some items, such as manmade fibre sweaters, reaching 52%, disproportionately affecting women workers.
While the tariffs are less stringent than those applied to India or China, they can erode demand for Bangladesh exports to the US, according to the report.
The report further noted that Bangladesh's exporters will also face stiffer competition in the European Union, forcing them either to cut prices or risk losing market share.
To cushion the blow, the ADB suggested that Bangladesh diversify its export markets, explore new trade agreements, and take measures to enhance competitiveness.
Developing Asia and the Pacific's growth to dip amid a new global trade environment
The ADB has lowered its growth outlook for developing Asia and the Pacific by 0.1 and 0.2 percentage points for this year and next, respectively, amid the emergence of a new global trade environment, shaped by tariffs and updated trade agreements.
Economies in the region are projected to grow by 4.8% this year and 4.5% next year, compared with April forecasts of 4.9% and 4.7%, respectively.
Higher tariffs imposed by the US and elevated trade uncertainty are expected to weigh on the region's growth.
Inflation in developing Asia and the Pacific will continue to ease to 1.7% this year amid lower prices for food and energy, before increasing modestly to 2.1% next year as food prices normalise.
Trade risks pose the main threats to the outlook. To varying degrees, unresolved US–China tensions, sectoral duties on semiconductors and pharmaceuticals, and further tariff hikes could all impact economies in the region, according to the report.
