B Mirror Report:  Bangladesh’s economic outlook for 2026 reflects moderate growth prospects alongside persistent structural challenges, with inflation expected to gradually ease, according to the Economic Update and Outlook (January) released by the General Economics Division (GED) of the Planning Commission.

The GED report noted that the economy could grow at around 5 percent, provided strong governance, policy continuity and sustained investment in skills and technology are ensured. It stressed the need for diversification beyond the ready-made garment sector as Bangladesh approaches graduation from the least developed country (LDC) category and manages a democratic transition.

A stable political environment combined with effective technology integration is crucial for moving from a low-cost labour-based economy to higher-value economic activities, the report said. However, it warned that uncertainty among economic elites and institutional weaknesses continue to pose significant risks.

The publication also highlighted slow progress toward the Sustainable Development Goals (SDGs), recommending evidence-based policymaking and village-level interventions to promote sustainable development at the grassroots.

Inflationary pressure intensified in December 2025, with general inflation rising to 8.49 percent from 8.29 percent in November, driven mainly by higher food prices amid persistently elevated non-food inflation.

Food inflation increased to 7.71 percent from 7.36 percent, while non-food inflation remained high at 9.13 percent. Although rice inflation continued to decline across all categories, prices stayed elevated. Overall rice inflation eased to 11.92 percent in December from 12.26 percent in November. Medium rice inflation fell to 10.48 percent, fine rice to 14.84 percent, and coarse rice to 10.92 percent.

Rice’s contribution to food inflation dropped from 40.28 percent to 37.34 percent, while fish and dry fish emerged as the largest contributor, rising sharply to 43.34 percent. Onion prices shifted from a negative to a positive contribution, while potatoes continued to ease inflationary pressure.

Price inflation continued to outpace wage growth, widening the gap between living costs and earnings. While inflation rose by 0.20 percentage points, wage inflation edged up slightly from 8.04 percent to 8.07 percent in December.

Provisional data from the Bangladesh Bureau of Statistics (BBS) showed real GDP growth in the first quarter of FY2025–26 improved to 4.50 percent, up from 2.58 percent in the same period a year earlier. Overall GDP growth in FY2024–25 stood at 3.72 percent at constant prices.

Sectoral performance improved across the board. Agricultural growth rebounded to 2.3 percent after contracting the previous year. Industrial growth surged to 6.97 percent from 3.59 percent, while the services sector expanded to 3.67 percent, supported by transport, accommodation and information services.

The structure of the economy continued to shift gradually toward industry, with agriculture’s share of GDP falling to 9.84 percent and the industrial sector’s share rising to 38.34 percent.

On the financial front, bank deposits grew steadily, reaching 10.8 percent year-on-year growth in November. Public sector credit expanded sharply to 23.24 percent, reflecting increased government borrowing, while private sector credit growth remained subdued at 6.58 percent, indicating weak private investment.

For FY2025–26, the revised revenue target was set at Tk 5.54 trillion. Revenue collection in December stood at Tk 36,191 crore, falling short of the monthly target by Tk 15,174 crore, although performance improved compared to the previous month and year.

The Revised Annual Development Programme (RADP) was cut to Tk 2.0 trillion from the original Tk 2.3 trillion, reflecting fiscal constraints. Allocations increased in sectors with stronger implementation capacity, including Environment, Forestry and Water Resources and Local Government and Rural Development, while major reductions were made in health, transport, education and energy.

Despite lower funding, the number of approved projects rose, pointing to a broader but more resource-constrained development agenda.

External sector indicators showed improvement, with foreign exchange reserves rising to US$33.19 billion in December 2025. Remittance inflows strengthened to US$3.22 billion, supported by regulatory incentives and a more flexible exchange rate system.

Export earnings stabilized at around US$4.0 billion per month, with the garment sector remaining the primary driver. The exchange rate remained broadly stable, with easing appreciation pressure in real effective exchange rate terms.