ADB report flags economic strain amid ongoing political uncertainty

Bangladesh’s economy is under notable strain as political uncertainty, tight policy measures, and global instability converge to slow growth, according to the Asian Development Outlook 2025 released by the Asian Development Bank on Thursday.

The report says uncertainty in the political environment has dampened GDP growth and weakened domestic demand for goods and services. This has been compounded by restrictive fiscal and monetary policies, further weighing on overall economic activity.

The ADB draws parallels with Nepal, noting that political instability poses a common risk for developing economies by undermining investment, production, and consumer confidence.

In its April 10 outlook, the ADB projected Bangladesh’s GDP growth would decline to 4 percent in the current fiscal year. The ongoing tensions in the Middle East are cited as a major factor, with global uncertainty, volatile fuel and commodity prices, and disrupted trade flows continuing to affect import-dependent economies like Bangladesh.

However, the outlook is not entirely negative. The report suggests that political uncertainty has eased somewhat following the national election, which could gradually help restore economic momentum. A recovery in investor confidence and improved market stability may support a rebound in growth.

Explaining GDP, the report describes it as the total value of all goods and services produced within a country over a given period. While stronger growth typically boosts income and employment, the ADB cautions that gains are not always evenly shared and may widen income inequality without inclusive policies.

The ADB has committed $5.21 billion in support for Bangladesh in 2025. Of this, $2.57 billion will be provided through loans and grants, with the remainder coming via co-financing from private sector partners and development agencies. The funding is expected to support infrastructure development, financial sector reforms, and social protection programmes.

The report also highlights persistent weaknesses in the banking sector, including poor governance, weak oversight, and capital shortfalls. These issues have constrained access to credit—particularly for small and medium enterprises—and left many households outside the formal financial system, posing a challenge to inclusive growth.

To address these concerns, the ADB has launched a $500 million programme for 2025 aimed at strengthening bank supervision, improving asset quality, and modernising liquidity management. The initiative also seeks to expand digital banking, improve access to affordable finance, and accelerate private sector development.