Bangladesh’s economic growth has slowed due to high interest rates, costly energy, and political instability. Business leaders report liquidity crises in banks and reduced consumer spending affecting internal trade. However, recent government interventions may indicate potential improvements, while challenges persist in various sectors, particularly in manufacturing and construction. Significant reforms and strategies are needed to stimulate growth and prepare for the 2026 LDC graduation.
Bangladesh’s economic growth has recently experienced a decline primarily due to elevated interest rates, high energy costs, and political instability. Business leaders and economists assert that the combination of these factors inhibits expansion in a country with a robust workforce. High costs of funding and insufficient energy resources remain significant barriers against the development of a stronger business landscape.
Zakir Hossain Nayan, from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), emphasized that domestic businesses are encumbered by soaring interest rates and the rising value of the US dollar. This inflation has led to decreased consumer spending, adversely affecting internal trade especially in mid-2023, although some recovery is noted recently.
Bank liquidity issues are exacerbated by previous governmental mismanagement, which allowed certain businesses to exploit banking policies for large loans. Consequently, multiple banks struggle to invest anew, contributing to a forecast of continued weak business growth into the latter part of 2024. Despite these challenges, Nayan noted improvements in cash flow within the banking sector and a reduction in dollar-related crises.
Taskeen Ahmed, President of the Dhaka Chamber of Commerce & Industry (DCCI), reported that GDP growth was meager at 1.8% during Q1 of the fiscal year, with manufacturing only at 1.43%. He stressed the necessity for skills development, low-cost credit access, strategic trade agreements, and infrastructural improvements to attract foreign direct investment. There is also a call for policy reforms to bolster exports in sectors beyond fashion, particularly in pharmaceuticals and technology.
Khandoker Rafiqul Islam, a former leader of the garment industry, indicated that while the garment sector met recent export targets by operating at full capacity, ongoing high costs and unreliable energy supplies pose significant risks to future growth. The textile industry is particularly vulnerable, suffering from capital shortages and energy inconsistencies despite recent successes.
According to the Bangladesh Purchasing Managers’ Index (PMI), there was a 1.1-point decline in February, signifying slowed growth primarily in construction and services, while agriculture and manufacturing maintained a healthier pace of expansion. The PMI, created in part by the Metropolitan Chamber of Commerce, serves to provide insight into economic trends.
Notably, while agriculture and manufacturing sectors enjoyed growth, the construction and services industries experienced slower rates of expansion, accompanied by rising input costs and persistent order backlog declines. M Masrur Reaz, Chairman of Policy Exchange, noted that recovery hinges upon stabilizing political conditions and implementing necessary reforms promptly, amidst ongoing sluggish demand and energy issues.
In summary, Bangladesh’s economy is facing significant challenges, including high costs of financing and energy, coupled with political instability impacting growth. Business leaders call for skill enhancement, access to affordable credit, and strategic trade agreements to foster development. Meanwhile, the PMI indicates both resilience and vulnerabilities across different sectors, underscoring the need for comprehensive reforms and improved governance to promote sustained economic growth moving forward.
Original Source: unb.com.bd
