A medium to large-scale flood is likely to occur in the 2025-26 financial year, which will begin on July 1, and erode 0.48 percentage points of the gross domestic product growth in the year, according to the finance ministry.
鈥業n FY26, the GDP growth may decline to 5.1 per cent from the baseline projection of 5.5 per cent as a result of the flood,鈥� according to the Medium-Term Macroeconomic Policy Statement FY 2025-26 to FY 2027-28.
Analysing the country鈥檚 13 major floods and eight cyclones, each resulting in GDP losses of more than 0.1 per cent over the past four decades, the policy statement released on June 2 with the announcement of the proposed national budget by finance adviser Salehuddin Ahmed put the flood among the risks for FY26.
According to the World Risk Index 2024, Bangladesh ranked as the ninth most at risk country globally due to its high exposure to natural disasters.
The Climate Risk Index 2025 estimates that natural disasters may result in annual economic losses of approximately $3 billion impacting over 6.3 million people each year.
The Bangladesh Bureau of Statistics reports an average annual GDP loss of 1.32 per cent in 2016-2021 due to such disasters, according to the MTMPS.
The policy statement also highlighted the potential deviations from baseline trends in several areas, including private consumption, overall fiscal balance, public debt levels, as well as exports and imports due to the flood in FY26.聽
The government expenditures are projected to rise by 2.93 per cent due to relief efforts to make up the possible losses in agricultural output and reconstruction of damaged infrastructure, said the policy statement.
It said, 鈥業n FY26, the private consumption growth may decline from the baseline projection of 6.6 per cent to 5.3 per cent as a result of the flood.鈥�
This reduction is primarily due to significant agricultural losses, which will negatively impact household incomes and food availability.
The policy statement said that as a result of the flood shock, the overall fiscal deficit was projected to rise in FY26, primarily driven by an increase in the government expenditure from the baseline projection.
As the government spending increases without a commensurate rise in revenue, the financing gap is expected to be met through additional public borrowing.
Consequently, public debt levels would rise, with the debt-to-GDP ratio increasing from 36.6 per cent to 36.8 per cent in FY26, said the policy statement.
