Staff Correspondent:

The World Bank (WB) has forecasted that Bangladesh’s Gross Domestic Product (GDP) growth may decline to 3.3% in the current fiscal year (2024-25). The slowdown is attributed to political uncertainty and financial pressures.

This projection was shared in the World Bank’s biannual report, South Asia Development Update: Taxing Times, published on Wednesday.

According to the report, although Bangladesh’s growth may slightly recover in the 2025-26 fiscal year, it is expected to reach only 4.9%, which is lower than earlier projections.

The organization also expressed concerns about the overall growth across South Asia. According to the World Bank’s forecast, economic growth in the region will fall to 5.8% in 2025, which is 0.4% lower than the forecast made last October. However, it may rise to 6.1% in 2026.

The World Bank emphasized that increasing domestic revenue collection is crucial for sustainable economic progress in South Asia. While the region’s tax rate is relatively higher than in other developing areas, actual tax collection remains significantly low.

The report noted that between 2019 and 2023, the average public revenue in South Asia was just 18% of GDP, compared to 24% in other developing regions. Weak tax systems, a large informal economy, and the dominance of the agricultural sector were identified as key reasons behind this.

Franziska Ohnsorge, Chief Economist for the World Bank’s South Asia Region, stated, “Low revenue is the main source of financial vulnerability in South Asia. It can become a major threat to economic stability amid global uncertainty.”

The report also highlighted concerns regarding growth in other countries in the region. In Afghanistan, reduced international aid may cause growth to fall to 2.5%, while in Nepal, natural disasters are expected to bring it down to 4.5%. Pakistan’s growth is projected at 2.7% and Sri Lanka’s at 3.5%.

India is expected to see 6.5% growth in the 2024-25 fiscal year, slightly decreasing to 6.3% in the following year.

In Bhutan, agricultural sector weaknesses are projected to reduce growth to 6.6% in 2024-25, but improvements in the hydropower sector may push it up to 7.6% in 2025-26. The Maldives is expected to see 5.7% growth due to an airport expansion project.

Martin Raiser, the World Bank’s Vice President for the South Asia Region, said, “Multiple shocks over the past decade have weakened the region. Now is the time to expand trade, modernize agriculture, and activate the private sector to quickly create jobs and foster growth.”

The report recommended increasing revenue by reforming the tax system, simplifying tax regulations, leveraging technology, curbing tax evasion, reducing exemptions, and imposing taxes on environmental pollution.