Bangladesh is grappling with its most profound economic slowdown in over two decades. Excluding the pandemic-affected fiscal year, the country’s Gross Domestic Product (GDP) growth has plummeted to its lowest in 25 years. Investment has also fallen to its lowest level in a decade, and inflation has remained stubbornly high at around 10% for three consecutive fiscal years-the longest such streak since 1986.
Economic Indicators at a Glance: GDP Growth: The Bangladesh Bureau of Statistics (BBS) estimates the GDP growth rate for the 2024-25 fiscal year at 3.97%. This marks the lowest growth since the 2001-02 fiscal year, excluding the COVID-19 pandemic year.
Inflation: Inflation has been hovering above 9% since March 2022, with the BBS reporting a rate of 10.87% in October 2024.
Investment: The gross investment rate stands at 29.38% of GDP, the lowest since 2013-14. Private sector credit growth has slowed to 6.82% in February 2025, the lowest since at least 2015.
Agriculture: The agricultural sector’s growth has declined by 1.79%, the lowest in the past decade, raising concerns about food security.
Employment: The unemployment rate rose to 4.49% in the July-September quarter of 2024, up from 4.07% the previous year.
Financial Sector: The financial sector remains fragile, with several banks facing challenges. The amount of non-performing loans has increased, and the situation of some important banks is fragile.
Expert Opinions on the Economic Crisis: Debapriya Bhattacharya, Head of the White Paper Preparation Committee, emphasizes the critical need to increase private investment to revive the economy.
He notes that while some macroeconomic indicators have stabilized, the benefits have not yet reached the common people due to the slow decline in inflation and stagnation in investment.
Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), attributes the sluggish private investment to factors such as political uncertainty, energy crises, and the law and order situation. She highlights that investors, both local and foreign, are hesitant to invest without predictability. She also points out that high interest rates and increased fuel prices have added to the cost of doing business, further discouraging investment.
Mustafizur Rahman, Distinguished Fellow at the CPD, concurs with Khatun’s assessment, adding that the tight monetary policy aimed at controlling inflation has made borrowing more expensive. He suggests that the current situation reflects a “wait-and-watch” approach among investors due to ongoing uncertainty and the impending general elections.
Zahid Hussain, an economist, notes that the industrial and services sectors have experienced significant slowdowns due to both demand and supply-side constraints. He attributes this to persistently high inflation eroding consumer purchasing power and energy shortages affecting capacity utilization.
Government’s Response and Challenges: The interim government’s efforts to stabilize the economy have yielded mixed results. While the decline in foreign exchange reserves has been halted and the value of the rupee has stabilized somewhat, challenges persist. The World Bank has projected a 4% GDP growth for FY25, citing political turmoil and weakened investor confidence as significant factors.
Meanwhile, the 2025-26 fiscal year budget faces the challenge of controlling inflation and removing obstacles to investment. If the national election is held in December, the government will have six months to implement the budget. However, if the election is held in June, the interim government will have to implement the entire budget.
Pathways to Recovery: To address the economic slowdown, experts suggest several measures:Enhancing Private Investment: Creating a stable and predictable environment is crucial to attract both domestic and foreign investment. This includes addressing political uncertainty and improving the law and order situation.Controlling Inflation: Implementing policies to reduce inflation will help improve the purchasing power of consumers and reduce the cost of doing business.Strengthening the Financial Sector: Addressing the fragility of the financial sector by reducing non-performing loans and improving the health of banks is essential for economic stability.Boosting Agricultural Productivity: Investing in the agricultural sector to increase productivity can help ensure food security and reduce poverty.
Creating Employment Opportunities: Developing policies to create jobs, particularly for the youth, can help reduce unemployment and poverty rates.Bangladesh stands at a critical juncture. While some macroeconomic indicators have stabilized, the economy remains fragile. The key to sustainable growth lies in increasing private investment, controlling inflation, and addressing structural issues in the financial and agricultural sectors. The government’s ability to implement effective policies amidst political uncertainty will determine the country’s economic trajectory in the coming years.
