Bangladesh’s economic trajectory, as projected by the World Bank, is facing significant headwinds, with growth expected to decelerate to 4.1% in the fiscal year 2025.
This represents the country’s slowest expansion since the pandemic, falling significantly below the government’s revised GDP growth projection of 5.25%.
The downturn is attributed primarily to political upheaval in mid-2024, which eroded investor confidence and disrupted industrial activities.
The economy, already struggling with supply-side constraints such as energy shortages and import restrictions, now faces additional pressures from heightened inflation, which has weakened household purchasing power and reduced consumption.
Implications of this economic slowdown are far-reaching.
Services sector, which accounts for over 50% of Bangladesh’s GDP, has been significantly impacted by falling domestic demand.
Industrial sector, contributing 35.36% to GDP in FY23, is also reeling under the combined weight of energy supply disruptions and restricted access to imported raw materials.
According to provisional data from the Bangladesh Bureau of Statistics (BBS), GDP growth for the July-September quarter of FY25 was only 1.81%, a sharp decline from 6.04% during the same period in the previous year.
This marked the slowest quarterly growth in nearly four years.
High inflation remains a critical challenge, averaging 9.08% in 2024, with food inflation exceeding 12% during key months.
This has severely constrained household budgets, disproportionately affecting the lower and middle-income population.
For a country where nearly 20% of the population lives below the poverty line, rising prices pose severe risks of deepening poverty and widening inequality.
Furthermore, the unemployment rate, officially reported at 4.37% in FY23, is likely to rise as slowing industrial and services sectors struggle to maintain current workforce levels.
Political uncertainty has added another layer of complexity.
Foreign direct investment (FDI), which stood at $3.47 billion in FY23, has seen a declining trend, as investors adopt a cautious stance amid concerns over governance and economic policy consistency.
Export growth, traditionally a key driver of Bangladesh’s economy, has also stagnated, with year-on-year export earnings increasing by a modest 3.52% during the first five months of FY25.
To address these challenges, Bangladesh must prioritise political stability to rebuild investor confidence and facilitate economic recovery.
This includes fostering an inclusive political environment and strengthening institutions to ensure transparency and accountability. Addressing macroeconomic imbalances is also essential.
Controlling inflation through tighter monetary policy, while avoiding excessive contraction, is critical.
Strengthening food supply chains and providing targeted subsidies for essential commodities can help mitigate the immediate impact of rising prices on households.
Structural reforms are needed to address long-standing challenges.
Diversifying the energy mix, with a focus on renewable sources, can alleviate energy shortages and reduce dependency on imported fuels.
Trade facilitation measures, including reducing bureaucratic hurdles and improving port efficiency, will be vital to reinvigorate export performance.
Expanding access to credit for small and medium enterprises (SMEs), which employ around 24% of the workforce, can stimulate local economies and foster job creation.
Social safety nets must be expanded to protect the most vulnerable segments of the population.
Subsidised food distribution programmes, cash transfers, and skill development initiatives can provide immediate relief and long-term resilience.
Encouraging private investment in labour-intensive sectors, such as garments and agro-processing, can create jobs and spur economic activity.
The stakes for Bangladesh are high.
With South Asia projected to grow at 6.2% in 2025-26, largely driven by India’s robust performance, Bangladesh risks falling behind its regional peers.
The World Bank’s optimistic projection of a recovery to 5.4% GDP growth in FY26 hinges on successful reforms, political stability, and an improved business environment.
By addressing current challenges and focusing on inclusive growth strategies, Bangladesh can navigate this turbulent period and secure a sustainable path to development.
