Bangladesh’s economic growth has recently decelerated due to high interest rates and energy costs, coupled with political uncertainty. Leaders argue that these factors hinder business expansion despite the country’s workforce. Calls for urgent reforms focus on improving liquidity in banking, diversifying exports, and developing skills in small and medium enterprises.
Bangladesh is currently experiencing a slowdown in economic growth, largely attributed to high interest rates, costly energy supplies, and ongoing political uncertainty. Trade leaders and economists note that while the nation possesses a substantial workforce, these issues are significantly hindering business expansion. High inflation has led to reduced consumer spending, adversely impacting internal trade during the latter part of 2022, although there are signs of recovery now.
Zakir Hossain Nayan, of the Anti-Discrimination Business Forum, reported that banks are currently facing a liquidity crisis due to previous misuse of banking policies, which has hindered new investments. Consequently, many banks remain skeptical about lending to businesses, suggesting that weak business growth may persist into the latter half of 2024. There is, however, cautious optimism with improvements in the banking sector, a gradual easing of the dollar crisis, and declining inflation levels.
The export sector shows resilience amidst challenges, such as unrest within the garment industry, with projected increases in orders by 10-15% in 2025. Taskeen Ahmed, president of the Dhaka Chamber of Commerce & Industry, noted that the GDP growth rate was a modest 1.8% in the first quarter of the current fiscal year. He insists on the essential need for skill development in small and medium enterprises, access to low-cost credit, and improved infrastructure to attract foreign direct investment.
Ahmed also stressed the importance of diversifying exports beyond the garment sector, recognizing potential areas in pharmaceuticals, agro-processing, and information technology. He called for a comprehensive Smooth Transition Strategy, emphasizing the private sector’s vital role in facilitating these changes and ensuring low-cost funding.
Khandoker Rafiqul Islam, former BGMEA president, acknowledged recent success in garment exports but warned of difficulty maintaining this momentum due to excessive costs and unreliable energy supply. In February, the Purchasing Managers’ Index (PMI) reflected a slight decline, indicating slower expansion in the construction and services sectors compared to robust growth in agriculture and manufacturing.
Lastly, M Masrur Reaz from Policy Exchange noted that while sustained expansion is notable over five months, business confidence remains fragile due to energy disruptions and sluggish demand, suggesting that future recovery will hinge on political stability and effective implementation of reforms.
In conclusion, the economic landscape in Bangladesh remains challenging, marked by high costs and political instability that impact business operations. Although there are signs of gradual recovery, especially in the export sector, sustained growth will require strategic reforms, enhanced investment avenues, and a focus on diversifying exports. Business confidence is crucial for navigating these challenges and fostering a conducive environment for economic progression.
Original Source: unb.com.bd
