Country’s economy is currently navigating a difficult reality, pressured by three major challenges—high interest rates, stagnation in investment, and a worsening employment situation. The economic slowdown that began at the start of FY 2024–25 due to political instability and structural weaknesses has still not fully dissipated.
Recent data show some signs of a turnaround in a few macroeconomic indicators, but the challenges in investment, industrial production, and job creation remain clear.
These findings are highlighted in the annual publication Bangladesh State of the Economy, issued by the General Economics Division (GED) of the Planning Commission.
The book presents an updated picture of the economic situation for FY 2024–25. On Monday, the Planning Commission held a seminar at the NEC Conference Hall in Sher-e-Bangla Nagar to launch the reports Bangladesh State of the Economy 2025 and SDG Progress Report 2025.
The event was chaired by GED Member (Secretary) Dr Manzoor Hossain, while the keynote paper was presented by Additional Secretary Dr. Munira Begum. Special Assistant to the Finance Ministry, Dr Anisuzzaman Chowdhury, attended as chief guest.
According to data from the Bangladesh Bureau of Statistics (BBS), GDP growth dropped to just 2 percent in the first quarter of FY 2025. The impact of political uncertainty and market stagnation directly affected the industrial and services sectors. During the same period, agriculture grew only 0.76 percent, industry 2.44 percent, and services 2.41 percent.
However, the economy began to gradually recover in the second and third quarters. Industrial growth jumped to 7.1 percent in the second quarter and stood at 6.91 percent in the third. Overall GDP growth rose to 4.9 percent by the third quarter.
Yet analysts warn that this recovery is not sustainable. In particular, the high-interest-rate environment is exerting significant negative pressure on investment.
To control inflation, Bangladesh Bank has maintained the policy rate at 10 percent for the past six months. As a result, private-sector credit growth has fallen to around 7 percent. By June 2025, private credit growth stood at just 7.15 percent—insufficient to support investment expansion. At the same time, increased government borrowing has further tightened liquidity for private borrowers, effectively squeezing investment.
This contraction in investment has had a direct impact on industrial production. According to the index of industrial production, total industrial growth in FY 2024–25 was only 4.3 percent. While October and December posted strong growth of 11.39 percent and 10.36 percent respectively, output turned negative again in August.
Despite seasonal improvements, the sector has not achieved sustained momentum. Limited expansion in production has also meant limited job creation.
Consequently, the employment situation has become increasingly concerning. The Labor Force Survey shows that the unemployment rate rose to 3.66 percent in 2024, up from 3.35 percent the year before. Even more worrying is youth unemployment, which climbed from 7.25 percent to 8.07 percent in just one year. The share of young people not in education, employment, or training (NEET) has risen to 20.3 percent. Although the economy is undergoing structural transformation, the employment structure is failing to respond.
Another major pressure point is inflation. Although inflation has eased somewhat in recent months, it remains a heavy burden for ordinary people. Point-to-point inflation fell to 8.48 percent in June 2025—the lowest in two years. Food inflation dropped to single digits, but rising rice prices are a growing concern. Rice alone accounted for 51.55 percent of food inflation in July, with medium rice responsible for nearly one-fourth of the total. Despite increased production after the Boro harvest, the market has not reflected this.
The agriculture sector also shows worrying signs. In FY 2025, Aush and Aman production declined by 0.85 percent and 6.04 percent respectively. Climate change impacts, frequent floods, and unpredictable weather are making agriculture more vulnerable, adding pressure on inflation and food security.
In this context, the interim government has taken several measures to stabilize the economy. Bangladesh Bank has been given additional authority to restore discipline in the banking sector, and initiatives have been undertaken to merge weak banks. Budget allocations for labor market restructuring have been increased, and BIDA has been tasked with structural reforms and organizing an investment summit to attract investors.
Yet the reality remains: investment is not recovering under high interest rates; industrial production is not growing at the desired pace; and the biggest cost is being borne by employment. While the economy is on a path to recovery, the sustainability of this recovery hinges on structural reforms in investment and job creation.
At the seminar, Bangladesh Bank Governor Dr Ahsan H Mansur stated that since assuming office, he has taken various initiatives to ease economic pressures, which, he claimed, have put the economy on the path to recovery.
Courtesy: Daily Sun.
Bd-pratidin English/TR
