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���������ֳ�’s outlook on Bangladesh balances strong medium-term growth prospects and resilient external finances against low government revenue, a weak banking sector and softer structural metrics compared with the peer median. Low institutional capacity and willingness to address long-standing vulnerabilities in the banking sector exacerbate these shortcomings.Resilient Macro Performance: Bangladesh was one of the few countries in the Asia-Pacific region to record positive economic growth amid the Covid-19 pandemic. Private consumption was supported by strong remittance inflow, with the economy expanding by 3.5% in the financial year ending June 2020 and by 5.5% in FY21. We expect the expansion to reach 7.0% in FY22 and 7.2% in FY23 as the pace of vaccination increases and Covid-19 infections decline, facilitating a return to normalcy. Strong External Finances: External debt is manageable; nearly half of the debt is on concessional terms, which has kept down servicing costs. External debt service as a share of current external receipts is at 4%, far below the ‘BB’ median of 16%. Readymade garment exports, which make up the majority of exports, have recovered, after falling by 18% in FY20. Resilient exports and strong remittances have contributed to moderate current account deficits, which we expect will average at about -0.7% of GDP annually over 2021-2023. Fiscal Outlook Uncertain: We expect Bangladesh’s budget deficit to widen to 6.2% of GDP in FY22, from 5.8% in FY21, in line with authorities’ forecasts. However, there is downside risk to our forecast should the economic recovery be weaker than the authorities’ expectations. A weaker recovery could hurt government revenue or necessitate the extension of Covid-19 support measures. Bangladesh has a poor record of hitting revenue targets and its FY20 revenue/GDP ratio of 9.8% was far below the peer median of 28%.