Bangladesh’s economy is under significant strain in late 2026, with ready-made garment (RMG) exports posting modest quarterly gains after periods of decline, persistent factory closures and job losses, a severe fuel and power crisis, chronic revenue shortfalls, and ambitious spending on aircraft and mega projects amid cost overruns.
The World Bank and IMF have sharply lowered growth projections, highlighting energy shortages, banking-sector weaknesses, and weak revenue mobilisation as key constraints.
Export Performance: Modest Rise After Earlier Weakness
RMG exports, which dominate Bangladesh’s merchandise trade (typically around 80% of total earnings), rose 6.10% year-on-year to $10.58 billion in the first quarter (July–September) of FY2026-27, according to Export Promotion Bureau (EPB) data. Knitwear grew 6.88% and woven garments 5.11%. Shipments to the United States increased 10.40% to $2.22 billion, while non-traditional markets rose 9.40% to $1.81 billion. The EU remained the largest destination.
This follows a more mixed picture. Total goods exports in the first 11 months of FY2025-26 fell 2.55% year-on-year to about $44 billion, with RMG at roughly $35 billion. Full-year FY2025-26 RMG earnings were reported around $39 billion in some analyses, with only modest or uneven growth. Bangladesh Bank has noted rising production costs, stiffer competition from rivals, and weak demand in key markets as ongoing challenges, with near-term outlook described as moderately positive but cautious.
US Trade Deal and Related Pressures
Earlier reciprocal tariff threats from the United States (initially proposed at 37% in 2025, later reduced) disrupted orders and contributed to export volatility. In February 2026, the US and Bangladesh signed a Reciprocal Trade Agreement lowering the reciprocal tariff rate to 19% and establishing a mechanism for zero reciprocal tariffs on certain textile and apparel goods made with US inputs (tied to Bangladesh’s purchases of US cotton and man-made fibres). Bangladesh committed to greater market access for US goods and has ramped up purchases of US wheat, agricultural products, energy, and aircraft to narrow the trade gap and secure better treatment.
Factory owners previously described the higher tariffs as a “big disaster” that made order volumes unpredictable. While the deal has eased immediate pressure, dependence on the US market (about 21% of RMG exports in recent data) and linked purchase commitments remain points of vulnerability.
Factory Closures and Falling Employment
Hundreds of garment factories have closed in recent years, eliminating tens of thousands of jobs. BGMEA and other industry data indicate around 400 apparel factories shut over the past three years (or longer periods in some reports), with industrial police figures showing dozens of permanent closures in 2026 alone across major zones like Gazipur, Ashulia, and Chattogram, leaving thousands unemployed. Contributing factors include insufficient orders, financial distress, bank loan pressure, competition from India and Vietnam, automation, and energy disruptions. The sector employs over 4 million people, the majority women, amplifying social impacts.
Fuel Crisis and Loadshedding
Bangladesh is experiencing a prolonged energy crisis driven by declining domestic gas reserves, heavy reliance on imported LNG, global price shocks, and operational issues at floating storage and regasification units. Power generation shortfalls have reached thousands of megawatts, with load-shedding hitting records above 3,000 MW at peaks in 2026. Dozens of power plants have been idled due to gas shortages, forcing factories to cut production or use costly generators, while households face multi-hour outages (sometimes far longer in rural areas). This has raised manufacturing costs and disrupted exports.
Revenue Collection Shortfalls and Fiscal Pressures
The National Board of Revenue (NBR) has repeatedly missed targets. Provisional FY2025-26 collection reached about Tk 4.15 lakh crore against a revised target of Tk 5.03 lakh crore (shortfall of roughly Tk 87,500 crore). Earlier years also showed large gaps. Tax revenue as a share of GDP remains among the world’s lowest (around 8% in recent assessments). The World Bank and IMF have flagged weak domestic revenue mobilisation as limiting fiscal space, contributing to wider deficits and higher borrowing.
Aircraft Purchases and Mega Project Cost Overruns
Biman Bangladesh Airlines has pursued a major fleet expansion, with agreements for 25 Boeing aircraft (reported cost around $6.4 billion) and 10 Airbus jets (over $2 billion), for a total of about 35 new aircraft on order. Deliveries are phased over coming years. Officials link some purchases to broader US commercial deals, but critics question the timing and business case given the carrier’s current fleet size, financial capacity, and competing domestic needs.
Separately, a task force examining eight major projects from the previous government (including the Padma Bridge, Padma Bridge Rail Link, Dhaka Metro Rail Line-6, airport terminal, and others) found costs rose about 68% ($7.5 billion excess) from initial estimates of $11.2 billion to $18.64 billion, attributed to poor feasibility studies, delays, land issues, and corruption. Individual projects like the Padma Bridge saw costs more than triple from original estimates in some revisions. New metro lines have drawn scrutiny for high per-kilometre costs compared with regional peers.
Growth Projections: Sluggish Outlook
The IMF’s October 2026 World Economic Outlook cut Bangladesh’s FY2026-27 GDP growth forecast to 3.2% (from 4.3% in April), with average inflation projected at 10.9%. The World Bank projects 3.4% growth for both FY26 and FY27 (down from earlier estimates), citing energy and banking vulnerabilities, weak investment, and inflation. The Asian Development Bank has forecast around 4%. These are well below the government’s 6.5% target and the roughly 5–7% rates seen in stronger recent years. Actual growth in FY25–FY26 has been in the 3.5–3.7% range according to official and multilateral figures. Non-performing loans in the banking sector have risen above 30% in recent data.
Overall, the combination of external trade uncertainties, domestic energy and fiscal constraints, employment losses in the dominant export sector, and questions over large-scale spending has produced a subdued outlook. Multilateral institutions emphasise the need for faster reforms in energy, banking, and revenue mobilisation to support a more durable recovery. Data are drawn primarily from EPB, Bangladesh