United News of Bangladesh

Bangladesh’s economy is showing signs of a gradual recovery, though GDP growth remains under pressure due to historically low tax revenues and a struggling banking sector burdened by about 35 percent of defaulted loans. Professor Selim Raihan of the Economics department at Dhaka University, and also Executive Director of the South Asian Network on Economic Modelling (SANEM), told UNB that the IMF has downgraded Bangladesh’s GDP growth forecast, citing weak revenue collection, persistent inflation and growing fiscal stress. “This signals a slowing economy characterised by declining job creation, fragile private sector investment and increasing external vulnerabilities. Inflation is likely to remain high, placing further strain on household budgets and eroding purchasing power,” Dr Raihan explained. To address these issues, he recommended widening the tax base, cutting subsidies, and enhancing public financial management, and stressed the importance of bolstering the central bank’s independence, containing inflation and encouraging private investment through regulatory reforms. Dr Raihan also emphasised that diversifying exports, improving infrastructure, and investing in education and healthcare would strengthen economic resilience and support sustainable long-term growth. Bangladesh’s banking system continues to face major challenges, with a large share of defaulted loans constraining the flow of credit to the private sector, contributing to the downward revision of GDP growth forecasts by global lenders. Dr Raihan also noted that the government’s move to reduce allocations for mega development projects has compounded the slowdown. The IMF recently adjusted its GDP growth projection for the current fiscal year (FY 2024–25) to 3.76 percent – a slight drop from the 3.8 percent forecast in December 2024 and a notable decrease from the 4.5 percent projected in October 2024. ADB projects 3.9% GDP growth for Bangladesh in FY2024-25 Despite the revised outlook, Bangladesh ranks as the ninth-largest economy in Asia based on total GDP, now valued at US$450.5 billion according to 2024 data. The Asian Development Bank (ADB), in its 2025 Basic Statistics report, placed Bangladesh as the second-largest economy in South Asia, after India, among 46 countries surveyed (excluding Japan). The IMF’s projected 3.76 percent growth would mark the lowest since FY 2019–20, when the COVID-19 pandemic severely disrupted economies worldwide. For FY 2025–26, the IMF has also trimmed its growth forecast to 6.53 percent from the previously estimated 6.7 percent. While the IMF report did not provide detailed reasons for the downward revision, Chris Papageorgiou, Chief of the Development Macroeconomics Division in the IMF’s Research Department and head of a recent mission to Bangladesh, said the economy continues to face “multiple challenges amid elevated global uncertainty”. He highlighted a slowdown in GDP growth to 3.3 percent year-on-year during the first half of FY25, down from 5.1 percent during the same period in FY24. The decline was attributed to domestic unrest, tighter monetary and fiscal policies, and a general climate of uncertainty that has dampened investment sentiment. The ADB’s latest outlook closely mirrors that of the IMF, projecting 3.9 percent growth for FY 2025, rising to 5.1 percent in FY 2026. The Bank also warned of challenges such as subdued domestic demand linked to political transitions, the threat of natural disasters, labour unrest and persistently high inflation. Inflation remains one of the key concerns. The IMF expects inflation to stay around 10 percent during the current fiscal year, potentially easing to 5.18 percent in FY 2026. The ADB, meanwhile, forecasts an increase to 10.2 percent in FY 2025, with a projected decline to 8 percent in the following year. Bangladesh’s GDP growth 6.12% in Jan-Mar of FY 2023-24: BBS Despite these downward adjustments, both the IMF and ADB foresee a gradual recovery in Bangladesh’s economic trajectory over the medium term. But, the current outlook underscores the significant headwinds the country must navigate to sustain its previous high-growth momentum. Dr M Masrur Reaz, macroeconomist and Chairman of Policy Exchange Bangladesh, told UNB that despite the sluggish pace, the economy is gradually moving towards recovery. He highlighted that export earnings and remittance inflows are helping to stabilise the foreign exchange reserves and revitalise the rural economy – factors which are contributing positively to macroeconomic stability. “Severe regulatory lapses in the banking sector and massive loan scams have delayed the recovery of the macroeconomy. However, recent efforts to reform the banking sector and restore public confidence in financial institutions will be vital to reviving GDP growth,” he said. He cautioned that the IMF’s projections should not be interpreted as an indication that the economy is in dire straits.

The evolving global order and changing geo-economic landscape present both challenges and opportunities for developing countries, as highlighted by renowned economist Wahiduddin Mahmud. He shared his insights during a public lecture titled “Evolving Global Order and Geo-economics: Implications for Less Developed Countries” at the annual BIDS (Bangladesh Institute of Development Studies) conference in Dhaka. Thailand keen on FTA with Bangladesh as soon as possible The session, moderated by Policy Research Institute Chairman Zaidi Sattar, featured discussions with key figures including Selim Raihan, Executive Director of SANEM (South Asian Network on Economic Modelling), and Dr. Binayak Sen, Director General of BIDS. Mahmud emphasized the significance of strong public support for governments to align political and foreign economic interests effectively. He pointed out that this support is crucial in tackling the exploitation of developing countries by multinational companies. He also noted the distinct nature of the current geopolitical tensions between superpowers, particularly the US and China, compared to the Cold War era. High-level Saudi business delegation in Dhaka to explore investment opportunities here Discussing the economic strategies of Vietnam and China, Mahmud illustrated how government involvement in privatized sectors can yield benefits. Zaidi Sattar reflected on the shift from globalization to economic nationalism, observing that even advocates of globalization are adopting protectionist policies. This, he suggested, requires deep consideration by developing countries in crafting their economic strategies. Selim Raihan commented on Bangladesh's historical non-involvement in geopolitics and its emerging role as a significant player amidst global power conflicts. FBCCI will support steel industry to increase exports to Commonwealth nations Overall, the discussions at the BIDS conference underscored the need for developing countries like Bangladesh to carefully navigate the new global order, balancing internal economic policies with external geopolitical pressures.

Insufficient allocation, lengthy procedure, difficulty in bank-related services, and lack of information about the procedure left 68% of businesses unable to avail the government's stimulus package, the South Asian Network on Economic Modelling (Sanem) said Sunday. However, effective implementation of the stimulus package is critically important and assessment is urgently required on the package implemented so far. The packages need to be redesigned and expanded amid the current wave of Covid-19, they said. The government should undertake a sectoral approach to gauge the needs and identify the necessary policy measures for the worst affected industries such as leather and tannery, light engineering, transport, retails, restaurants, food processing, they added. Small and medium enterprises (SMEs) should be a priority in channelling the loans and stimulus packages. Also, effective implementation of the stimulus package is critically important. An assessment is urgently required on the stimulus package implemented so far, the experts suggested. Also read: SANEM finds 70% wage-earners in 4 dists. worse off in a year The observations came up at the webinar "Covid-19 and business confidence in Bangladesh: Findings from the 4th round of a nationwide firm-level survey." Sanem, in collaboration with Asia Foundation, initiated the quarterly Business Confidence Survey in July 2020. The third round of the survey was conducted in January and the fourth round in April 2021, which covered 253 firms from the manufacturing sector and 250 from the services sector.  "The sectors that need priority are light engineering, transport, retail, and leather and tannery as their recovery rate is slow. The stimulus packages are having positive impacts on the firms' recovery," Sanem Executive Director Selim Raihan said. Also read: SANEM survey: Population below poverty line doubled, extreme poor trebled in 2020 "The firms, on average, have been able to recover 57% of their damages occurred during this pandemic (March 2020 -March 2021), according to the survey. It shows the firms have not got back to the pre-pandemic situation, and it might take a while for them to be able to do so." Selim said the business confidence for April-June 2021 deteriorated compared to the one during January-March 2021; posing a threat to future businesses. The survey also found that the majority of the stimulus package recipient firms were from the manufacturing sector – 82.7% of all firms. Amongst the industrial sectors, 58% of the RMG firms received the stimulus package, whereas this rate is 40% for the textile and 30% for the leather industry. Also, it was the large firms who had greater access to the stimulus package: 46% of the surveyed large firms received the stimulus package in contrast to 30% medium firms and 9% small firms. Also read: Almost three quarters of firms yet to receive stimulus: SANEM Former lead economist of the World Bank Dhaka Zahid Hussain said recovery across the economy has been experienced to some extent; however, it has not been uniform across all sectors. "Time and again, it has been evident that large firms are at an advantage compared to micro and small firms. Large firms often have more influence and power, leading to better bargaining power and hence, giving them better access to stimulus packages," he added.   Dhaka Chamber of Commerce and Industry President Rizwan Rahman said the central bank and monetary institutions must formulate strict guidelines for the banking sector to ensure that loans are disbursed to small and micro-enterprises.