IMF further lowers Bangladesh's GDP growth for FY26 to 4.9%

The International Monetary Fund (IMF) has further lowered Bangladesh's GDP growth projection for the current fiscal year 2025-26 to 4.9%, a sharp decline from its earlier forecasts of 5.4% in July and 6.5% in April.

However, the multilateral lender projected that inflation would fall to 8.8% in FY26 and ease further to 5.5% in the following fiscal year, according to the IMF's latest World Economic Outlook released today (14 October).

The IMF growth projection remains close to the latest updates from other global watchdogs.

The World Bank and the Asian Development Bank (ADB) have projected GDP growth of 4.8% and 5%, respectively, in their recent updates for FY26.

The interim government has set a GDP growth target of 5.5% for the current fiscal year 2025-26, exceeding the projections made by international agencies.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, attributed the divergence to different approaches. He told TBS that while "government growth projections are typically more optimistic, multilateral lenders rely on more grounded assessments."

Nevertheless, he showed optimism, pointing to "positive signs already visible, with higher remittance inflows, export growth, easing inflation, a stabilised foreign exchange market, and stronger reserves." He added that greater political stability and a smooth transition in February 2026 could boost investment, making FY26 stronger than FY25.

Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), linked the global slowdown to the ripple effects of US trade tariffs.

"We are witnessing the rise of trade protectionism worldwide. The United States has imposed reciprocal tariffs that are affecting all economies. High tariffs reduce consumption, which is a key driver of growth," she explained.

Fahmida added that the lagged impact of these tariffs is now becoming apparent, leading to slower growth projections across most economies.

Global watchdogs echo similar growth expectations

Last week, the World Bank expressed cautious optimism about Bangladesh's economic rebound in FY26. However, it warned that the recovery could be undermined by persistent vulnerabilities in the banking sector and rising political uncertainty ahead of the upcoming national election.

In addition, the Washington-based lender highlighted further downside risks, including delays in reform implementation, potential trade disruptions stemming from global policy uncertainty, a slower-than-expected fall in inflation, and continued constraints in energy supply.

Similarly, in its September outlook, the ADB cautioned that Bangladesh's anticipated rebound could face headwinds from new US tariffs, escalating geopolitical tensions, elevated election-related spending, unsterilised liquidity support to weak banks, and ongoing structural weaknesses in the financial system.

Nevertheless, both institutions foresee some moderation in inflation, with the World Bank projecting it to ease to 7.4% in FY26 and the ADB estimating a slightly higher rate of 8%.

Global growth further slows

Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, with advanced economies growing around 1.5% and emerging market and developing economies just above 4%.

The growth forecast is little changed from the July 2025 WEO Update, reflecting gradual adaptation to trade tensions, but is decisively below the pre-pandemic average of 3.7%.

While inflation is expected to decline to 4.2% globally in 2025 and to 3.7% in 2026.