Dhaka, April 24, 2025 — The World Bank has issued a cautionary outlook on Bangladesh’s economy, forecasting only a slight recovery in the upcoming fiscal year. According to its latest South Asia Development Update, Bangladesh’s GDP growth is projected to reach just 4.9% in FY2025–26 — still below earlier projections and well beneath pre-pandemic levels. The report highlights political instability, inflation, and financial vulnerabilities as key factors behind the sluggish performance.
The broader South Asian region is also expected to face slower-than-anticipated growth. The World Bank projects economic expansion across South Asia to decline to 5.8% in 2025, down from its previous forecast of 6.2%. Growth may improve to 6.1% in 2026, but persistent structural weaknesses continue to pose risks.
Revenue Deficit: A Core Concern
One of the central themes of the report is the region’s chronic underperformance in tax collection. Despite relatively higher tax rates, South Asia struggles with low actual tax revenues. Between 2019 and 2023, average public revenue in the region was just 18% of GDP — significantly lower than the 24% average seen in other developing economies.
Franziska Ohnsorge, Chief Economist for the World Bank’s South Asia Region, emphasized, “Low revenue is the main source of financial vulnerability in South Asia. It can become a major threat to economic stability amid global uncertainty.”
The World Bank attributes this revenue shortfall to weak tax systems, a large informal economy, and the dominance of low-yield sectors like agriculture. The report calls for comprehensive reforms to improve revenue collection, including tax simplification, digitalization, reduction of exemptions, and environmental taxation.
Divergent Outlooks Across the Region
The report outlines varying growth trajectories for South Asian countries:
• India is projected to grow at 6.5% in FY2024–25, slightly easing to 6.3% the following year.
• Bhutan may see growth dip to 6.6% due to agricultural issues but could rebound to 7.6% in FY2025–26 with gains in hydropower.
• The Maldives is expected to post 5.7% growth, supported by airport expansion.
• Pakistan’s growth may stay subdued at 2.7%, while Sri Lanka is forecast to grow 3.5% amid recovery from its financial crisis.
• Nepal could see growth drop to 4.5% due to natural disasters.
• Afghanistan faces a bleak outlook, with growth likely to fall to 2.5% due to declining international aid.
Call for Reform and Private Sector Engagement
Martin Raiser, World Bank Vice President for South Asia, urged action: “Multiple shocks over the past decade have weakened the region. Now is the time to expand trade, modernize agriculture, and activate the private sector to quickly create jobs and foster growth.”
The report concludes by stressing that without urgent tax reforms and structural modernization, South Asia — including Bangladesh — risks falling short of its development goals in an increasingly uncertain global environment.