ADB forecasts slower growth due to political uncertainty

The Asian Development Bank (ADB) has revised its projection for Bangladesh's GDP growth, expecting it to slow to 4.3 percent in FY 2025, down from its previous estimate of 5.1 percent in September 2023. This downward revision reflects challenges including political uncertainty, supply disruptions, and tight monetary policies.

Challenges Facing Bangladesh’s Economy

In an interview with The Daily Star, Takeo Konishi, Director General of ADB's South Asia Department, highlighted the external pressures affecting Bangladesh. These include tight global financial conditions and rising commodity prices, which could further exacerbate structural issues such as:

• Limited economic diversification
• Heavy dependence on imported energy
• A large informal sector
• Climate vulnerabilities
• Weak governance and accountability

The ADB's revised forecast aligns with the Bangladeshi government’s plan to lower its GDP growth target to 5.25 percent in the revised FY 2025 budget, considering the impact of recent floods and contractionary monetary policies aimed at curbing inflation.

Inflation and Fiscal Pressures

Konishi warned that inflation is expected to remain elevated at around 10 percent in FY 2025, intensifying fiscal pressures due to:

• Domestic energy sector arrears
• Large government subsidy commitments

During his visit to Bangladesh from January 23 to 27, Konishi discussed foreign exchange reserves, investment, banking stability, and revenue mobilization with government officials, stressing the urgency of economic reforms.

ADB’s Financial Support for Bangladesh

The ADB remains committed to supporting Bangladesh’s economy. In 2024, the lender pledged over $1.2 billion in combined sovereign and non-sovereign financing, with plans to allocate around $2 billion in 2025.

The interim government (IG) has sought ADB’s assistance for key projects, including:

• Railway upgrades and addressing locomotive shortages
• Gas pipeline expansion
• Banking sector stabilization
• Social protection programs
• Human capital development

Konishi emphasized that ADB is aligning its projects with government priorities, ensuring high project readiness and effective execution.

Energy and Climate Commitments

Bangladesh remains highly vulnerable to climate change, with potential GDP losses of up to 30.5 percent by 2070 under high-emission scenarios. As part of its climate-focused initiatives, ADB aims to commit $1 billion in 2025 for:

• Policy and institutional reforms
• Climate-resilient infrastructure
• Renewable energy and decarbonization
• Disaster risk reduction

ADB is also providing technical assistance for the National Adaptation Plan (NAP) roadmap and working on river restoration projects and climate budgeting.

Within the energy sector, ADB has been a major partner for Bangladesh, financing:

• $5.2 billion in power projects
• $1.2 billion in the gas sector

Currently, nine projects worth $2.36 billion are underway, with new investments in power transmission and renewable energy expected in 2025.

Economic Transition and Private Sector Growth

As Bangladesh prepares for its transition from least-developed country (LDC) status, ADB is assisting in:

• Economic stabilization programs
• Budget frameworks for FY 2025-26
• Expediting sustainable development goals (SDGs)

ADB has also identified the private sector as a key driver of economic recovery and job creation, committing over $70 million in 2024 to private sector projects such as solar energy and textiles.

Konishi stressed the need for efficient project implementation, addressing delays caused by procurement issues, capacity gaps, and land acquisition challenges.

Conclusion

Despite political and structural challenges, ADB remains committed to supporting Bangladesh in achieving economic stability and sustainable growth. Through financial assistance, economic reforms, and climate-focused initiatives, ADB aims to help Bangladesh navigate its current economic hurdles while preparing for long-term resilience.