Dhaka – The World Bank has projected Bangladesh's growth at 3.4 percent in the current 2026-27 financial year, calling for more reforms in major sectors such as banking, domestic revenue mobilization, and energy.

"To avert economic downturn and return to an inclusive growth path, driven by private investment, fast and bold reforms are needed in the banking sector, domestic revenue mobilization, and the energy sector," Jean Pesme, World Bank Division Director for Bangladesh and Bhutan, said on Tuesday.

"The country needs to respond with urgency and speed up the reforms essential for protecting the poor and creating more and better jobs. The time to act is now," he said in a statement on the eve of releasing the Bank’s Bangladesh Development Update.

The Bank made this projection citing that investment activities in the South Asian country had softened, exports had lost momentum, and inflation remained elevated. These factors reduced household purchasing power and raised business costs.

In FY26, it said, poverty and inequality increased, with about 2.1 million more people living in poverty than the previous year.

It added that job creation had stalled, women had lost jobs, and banking sector vulnerabilities had intensified.

The non-performing loan ratio increased to 33.2 percent in June 2026 from 30.6 percent in December 2025.

Revenue collection at 8.3 percent of GDP remains among the lowest in the world, constraining public spending where it is needed. The fiscal deficit widened to 3.9 percent of GDP in FY26 from 3.5 percent in FY25, the Bank said.

It observed that financial sector weaknesses continued to affect credit intermediation and investor confidence, while limited fiscal space constrained public investment.

The Bank, however, said the country's external sector showed resilience, supported by strong remittance inflows and improving foreign exchange reserves. It said GDP growth is expected to improve to 3.9 percent in FY2028.

According to the World Bank update, Bangladesh's economic growth has been facing a slowdown since 2023, as persistent structural constraints—including a deepening energy sector crisis, financial sector vulnerability, and weak domestic revenue mobilization, along with global uncertainties—weigh on investment and economic activity.

It said social protection, energy, and agricultural subsidies help protect the poor and vulnerable.

But about half of the poorest households still remain outside any social protection programmes. The poverty impact of these programmes would be materially improved with better targeting; a more responsive social protection programme can ensure that limited public resources reach poor and vulnerable households more effectively, it suggested.