Bangladesh’s economic growth has slowed in recent months due to high interest rates, expensive energy supply and political uncertainty, according to trade body leaders and economists.
They highlighted that costly funding and inadequate energy supply are hindering business expansion despite the country’s large workforce.
Zakir Hossain Nayan, the Convener of the Anti-Discrimination Business Forum at the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), told UNB that the domestic business sector is struggling due to high interest rates and the rising exchange rate of the US dollar.
“People have reduced their consumption due to high inflation within their income limitations. As a result, Bangladesh’s internal trade suffered severely in July and August last year, though it is now slowly gaining pace,” he said.
He explained that banks are facing a liquidity crisis, as the past government and their affiliated businesses misused banking policies to secure large loans.
This has left over a dozen banks unable to make new investments, while others remain cautious about injecting fresh funds into businesses. Given these conditions, he said that business growth will remain weak in the second half of 2024.
He, however, said that the situation is improving as the government has increased money flow in the banking sector, the dollar crisis has eased, and inflation is trending downward.
He also mentioned that the export sector remains resilient despite challenges such as unrest in the garment sector, with export orders increasing by 10–15% in 2025.
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Taskeen Ahmed, President of the Dhaka Chamber of Commerce & Industry (DCCI), said that GDP growth in the first quarter of the current fiscal year was only 1.8%, while the manufacturing sector grew by just 1.43%.
He noted that Bangladesh’s economy continues to face various challenges, even as it prepares to graduate from the Least Developed Country (LDC) category in 2026.
To address these challenges, he emphasised the need for skill development in the SME sector, long-term access to low-cost credit, free trade agreements to boost exports to the Middle East and South Asia, infrastructure development to attract foreign direct investment (FDI), and reforms in revenue and related policies.
Ahmed also urged the government to implement policies to promote exports beyond the readymade garment sector, highlighting the potential of pharmaceuticals, leather goods, agro-processing, semiconductors, light engineering, and information technology.
He stressed that a comprehensive ‘Smooth Transition Strategy’ (STS) is crucial, with a strong role for the private sector. Ensuring low-cost funds is essential to revive business growth, he added.
Khandoker Rafiqul Islam, former President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told UNB that the garment sector has been able to meet export targets in recent months by operating at full capacity.
But he warned that sustaining this trend will be difficult if business expansion is stifled by high costs and an unreliable energy supply.
He pointed out that the domestic textile sector is struggling due to shortages in working capital and energy supply.
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The latest Bangladesh Purchasing Managers’ Index (PMI) report revealed a 1.1-point decline in February, recording a slower expansion rate of 64.6.
The report attributed this drop to weaker expansion in construction and services, although agriculture and manufacturing continued to grow at a faster rate.
The PMI, developed by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange with support from the UK Government and technical assistance from the Singapore Institute of Purchasing and Materials Management (SIPMM), provides timely insights into Bangladesh’s economic health.
According to the report:
The agriculture sector recorded its fifth consecutive month of expansion, with faster growth in new business, business activity, input costs and order backlogs. Employment contraction slowed.
The manufacturing sector posted its sixth consecutive month of expansion, with faster growth in new orders, factory output, input purchases, and supplier deliveries. But new exports, finished goods, imports and employment grew at a slower rate, while order backlogs contracted faster.
The construction sector saw its third month of expansion but at a slower pace. New business and construction activity slowed, while input costs rose. Employment returned to growth, and order backlogs contracted at a slower rate.
The services sector expanded for the fifth month but at a slower rate. Growth in new business, business activity and employment decelerated. The order backlogs index turned negative, while input costs increased.
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“Bangladesh’s PMI readings indicate sustained expansion for the fifth month, driven by continued export growth and a seasonal uptick in agriculture, while construction and services posted slower expansion,” said M Masrur Reaz, Chairman and CEO of Policy Exchange.
He cautioned that business confidence remains weak due to sluggish demand, energy disruptions, and ongoing protests.
A sustained recovery, he argued, will depend on improved law and order, political consensus on the election roadmap, and the swift implementation of key reforms.