Despite some encouraging macroeconomic signals in recent months, Bangladesh's economy continues to face significant structural challenges, particularly in exports, inflation control, and private investment. While policymakers highlight improvements in foreign exchange reserves and remittance inflows, economists warn that the underlying vulnerabilities remain unresolved, posing serious risks to sustainable growth.
Data from the Export Promotion Bureau (EPB) reveal that Bangladesh's export earnings have been declining for five consecutive months. In December alone, exports fell by a sharp 14.23 percent year-on-year. Over the first six months of the current fiscal year, export earnings dropped 2.19 percent compared to the same period last year. Analysts say this prolonged stagnation is a red flag for an economy heavily dependent on export-led growth.
Export slowdown raises alarm: Prof Dr Mustafizur Rahman, distinguished fellow at CPD, told The Daily Industry that the persistent fall in export earnings reflects deeper structural problems. “This is not a seasonal decline. We are seeing a sustained contraction in export performance. The garment sector, which contributes more than 80 percent of total exports, is struggling with falling global demand, high production costs, and energy disruptions,” he said.
He added that Bangladesh is losing competitiveness due to rising wage costs, currency volatility, and logistical inefficiencies. “Buyers are shifting orders to Vietnam and Cambodia where production is more predictable. Unless we address energy shortages, port congestion, and bureaucratic delays, export recovery will remain slow,” Dr Rahman warned.
According to industry insiders, factory owners are also suffering from limited access to working capital and delayed export payments, further squeezing profit margins.
Faruque Hassan, former President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), echoed similar concerns. “Orders are there, but not at previous levels. Buyers are negotiating harder on prices. With higher utility costs and rising interest rates, many exporters are operating at minimal profit or even losses,” he told The Daily Industry. He emphasized the need for policy support:”We need cash incentives, easier credit access, and stable energy supply. Otherwise, the export sector will remain under pressure.”
Inflation remains stubbornly high: Another major concern is inflation. According to the Bangladesh Bureau of Statistics (BBS), overall inflation rose to 8.49 percent in December. Food inflation stood at 7.71 percent, while non-food inflation surged to 9.13 percent.
Economists say high energy costs, weak market monitoring, and supply chain inefficiencies are preventing effective price control. Dr Zahid Hussain, former Lead Economist of the World Bank's Dhaka office, told The Daily Industry: “Inflation is no longer just a temporary shock. It has become embedded in the system. Fuel price hikes, import costs, and poor market supervision are keeping prices elevated.”
He warned that persistent inflation erodes purchasing power, especially for low- and fixed-income households. “When food prices rise, people reduce nutrition. When non-food prices rise, they cut healthcare and education spending. This has long-term social consequences,” Dr Hussain said.
Market mismanagement worsens price pressure: Experts also blame weak market oversight for price manipulation. Dr Khodoker Holam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), said: “We see syndication at different levels of the supply chain. From importers to wholesalers, artificial shortages are being created. Government monitoring is reactive, not proactive.” He added: “Without strong competition enforcement and real-time market surveillance, inflation will remain out of control.”
Golam Moazzem also pointed out that global fuel price fluctuations continue to impact local transportation and production costs. “Energy cost pass-through is immediate. Any rise in diesel or gas prices instantly reflects on food prices,” he explained.
Private investment confidence remains weak: Beyond exports and inflation, investment indicators paint a worrying picture. Bangladesh Bank data show that private sector credit growth fell to just 6.23 percent in October, far below the required level to support industrial expansion.
Meanwhile, settlement of letters of credit (LCs) for capital machinery imports declined 16.77 percent, raising concerns about future industrial growth.
Dr Selim Raihan, Professor of Economics at the University of Dhaka and Executive Director of SANEM, said: “This is a serious warning sign. Lower machinery imports mean fewer new factories, fewer expansions, and fewer jobs.”
He explained that high interest rates and banking sector instability are discouraging entrepreneurs.
“When loan interest crosses 14 to 16 percent, investment becomes unviable. Businesses cannot calculate profit margins under such conditions,” he said.
Banking sector instability deepens crisis: Economists argue that the weak banking sector is a major reason behind declining investment. Dr Arifur Rahman, former adviser to Bangladesh Bank, told The Daily Industry: “The historic level of non-performing loans has damaged confidence. Banks are cautious about lending, especially to new projects.”He added: “Unless governance improves and defaulters are brought under discipline, credit growth will not recover.”
According to Bangladesh Bank data, defaulted loans have crossed Tk 6.44 trillion, putting severe pressure on financial institutions. Energy crisis discourages industrial activity: The ongoing gas and electricity shortages are also hurting industrial confidence.
Engineer Md Shamsul Alam, Energy Advisor to the Consumers Association of Bangladesh (CAB), said: “Industries cannot operate on unstable energy supply. Even short disruptions result in production losses and order delays.” He warned: “If energy security is not ensured, foreign investors will continue to avoid Bangladesh.”
Government optimistic, economists cautious: Government officials remain optimistic, citing improvements in remittance inflows and forex reserves. A senior official of the Ministry of Finance, speaking on condition of anonymity, told The Daily Industry: “We are seeing positive trends. Reserves are stabilizing, and remittances are growing. The worst is over.”However, economists strongly disagree.
Dr Debapriya Bhattacharya, Honorary Fellow at CPD, said: “Macroeconomic stability is not achieved by one or two indicators. You must look at exports, investment, inflation, and employment together.” He warned: “Right now, all three engines of growth - exports, consumption, and investment - are weak.”
Global factors also playing role: Analysts say the global economic slowdown, especially in Europe and the US, is affecting Bangladesh's export demand. Dr Khondaker Golam Moazzem, Research Director at CPD, said: “Western markets are facing recessionary pressures. Apparel demand is soft. Bangladesh cannot escape global realities.”
However, he emphasized diversification: “We depend too much on garments. We must expand exports of pharmaceuticals, leather goods, and IT services.”
Rising living costs hurting households: High inflation is forcing families to change their lifestyle. Rubina Akter, a schoolteacher in Mirpur, told The Daily Industry: “My salary has not increased, but everything costs more. We cut fish and meat from our diet.”
Social experts warn that prolonged inflation could increase poverty. Dr Nazrul Islam, Development Economist, said: “If inflation stays above 8 percent, poverty reduction will reverse. Informal workers are already struggling.”
What needs to be done: Experts suggest a combination of short-term and long-term reforms. Dr Ahsan H Mansur recommended: “Ensure uninterrupted energy supply, control market syndicates, and reduce interest rates gradually.” Dr Selim Raihan added: “We must restore banking discipline, bring back confidence, and simplify investment procedures.”
Dr Mustafizur Rahman stressed: “Structural reforms in tax administration, port efficiency, and regulatory transparency are essential.” While some positive macro indicators offer temporary relief, Bangladesh's economic foundation remains fragile. Export earnings continue to fall, inflation remains stubbornly high, and private investment confidence is weak. Experts warn that unless immediate policy corrections are implemented, the economy could face deeper challenges in the coming months.
As Dr Debapriya Bhattacharya summed up: “Stability is not about survival, it's about recovery. And recovery needs bold reforms.” For now, Bangladesh stands at a crossroads-either undertakes decisive structural changes or risk prolonged economic stagnation.
