ADB lowers Bangladesh's growth forecast amid political turmoil

Dhaka: The Asian Development Bank (ADB) has slashed its economic growth forecast for Bangladesh to 5.1 percent , primarily due to supply chain disruptions caused by political unrest experienced in July and August. Previously, the ADB had projected a growth rate of 6.6 percent for the fiscal year 2024-25, according to The Daily Star.

The Manila-based multilateral lender attributed the downgrade to violent protests and recent flooding, which have significantly impacted economic activity. The ADB noted that ongoing tight fiscal and monetary policies are likely to dampen consumption and investment demand further.
The bank described its forecast as highly uncertain, highlighting significant downside risks stemming from persistent political instability, a fragile law-and-order situation, and vulnerabilities within the financial sector. The revised forecast is lower than the World Bank's June projection, which estimated Bangladesh's economic growth at 5.7 percent for FY 2025.

The ADB also observed that demand remains suppressed due to elevated inflation, stringent global monetary conditions, and other macroeconomic challenges. It pointed out that inflation has remained high due to rising commodity and energy prices, along with currency depreciation. Additionally, the current account deficit has narrowed as both exports and imports have declined.
Looking forward, the ADB warned that inflation could rise to double-digit levels. The bank emphasised that achieving and maintaining macroeconomic stability will require accelerated reforms to enhance revenue, stabilise the financial sector through improved interest and exchange rate policies, and diversify the economy.

In a significant political development, Nobel laureate Muhammad Yunus assumed the role of head of an interim government on August 8 after widespread student protests forced Prime Minister Sheikh Hasina to resign and flee to India. Yunus has recently announced the creation of six commissions aimed at reforming various sectors, including the judiciary, electoral system, administration, police, anti-corruption efforts, and the constitution.