Bangladesh’s economy is facing mounting risks from slowing growth, persistently high inflation, sluggish investment and growing vulnerabilities in the banking sector, economist Jyoti Rahman has warned, urging the government to recognise the severity of the situation as an “economic emergency.”
In an article titled “A State of Economic Emergency,” published in the weekly Counterpoint on Tuesday, Rahman, an economist at the Panam Institute, cautioned that without effective measures, Bangladesh could remain trapped in a prolonged period of weak investment, stagnant growth and high inflation.
The article noted that international lending institutions have repeatedly downgraded their growth forecasts for Bangladesh amid the deteriorating economic outlook.
According to the International Monetary Fund (IMF), Bangladesh’s GDP growth forecast for fiscal year 2027 has been reduced from 4.7 per cent to 3.2 per cent. The projection for fiscal year 2028 has also been cut from 4.6 per cent to 2.2 per cent. The IMF expects annual growth could remain below 3 per cent even into the next decade.
The World Bank has similarly lowered its growth projections, reducing its forecast for fiscal year 2027 from 4.6 per cent to 3.4 per cent and for fiscal year 2028 from 5.5 per cent to 3.9 per cent.
Inflation is another major concern. The IMF has raised its inflation forecast for Bangladesh in fiscal year 2027 from 6 per cent to 10.9 per cent. According to its projections, inflation is unlikely to fall to 5.5 per cent before fiscal year 2031.
Investment prospects also remain weak. The World Bank projects that total investment could contract by 0.5 per cent in fiscal year 2026, while investment growth may reach just 0.3 per cent in fiscal year 2027 and 1 per cent in fiscal year 2028.
The poverty outlook has also deteriorated. In April, the World Bank expected the poverty rate to decline from 20.5 per cent in fiscal year 2025 to 19.3 per cent in fiscal year 2028. Its latest projections, however, suggest that poverty could rise to 22.5 per cent in fiscal year 2026 and remain at 22.4 per cent in fiscal year 2028.
Government revenue is another source of concern. The IMF projects that Bangladesh’s revenue collection could remain at around 8 per cent of GDP through the end of the decade, significantly below its earlier projection of approximately 11.5 per cent.
Meanwhile, the government’s interest-payment burden is expected to increase. Interest payments accounted for 27.5 per cent of total government revenue in fiscal year 2025, a figure that could rise to nearly 40 per cent by fiscal year 2031.
Rahman argued that the economic crisis cannot be attributed solely to conflicts in the Middle East. Weaknesses in the banking system, financial distress among corporations, declining investment and policy uncertainty are also major obstacles to economic recovery.
He warned that sluggish growth and prolonged inflation are eroding people’s purchasing power, while real wages and labour-force participation are declining.
Continued investment stagnation, he said, would undermine economic growth, employment and government revenue simultaneously. Financial weaknesses in banks are constraining lending, while heavily indebted businesses are losing the capacity to invest.
Rahman argued that easing monetary policy or providing temporary credit support alone would not be sufficient to resolve the crisis.
He recommended restructuring banks and corporate entities, adopting prudent fiscal policies, ensuring consistency in exchange-rate management, reforming subsidies and providing targeted assistance to vulnerable households.
Even if reforms are implemented successfully, Rahman cautioned, restoring strong economic growth before the end of the decade could prove difficult.
He urged the government to publicly acknowledge the scale of the economic crisis, disclose the extent of losses in the banking sector and initiate a nationwide discussion on expenditure restraint and the reforms needed to restore economic stability.
Dhaka , 22nd October
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