Political turmoil and the ongoing law-and-order situation have brought the country’s economy and businesses to a standstill, raising fears of a developing economic crisis.
Even interim government representatives admit that the country's economy is in a highly fragile state, and they are seeking an extension for LDC graduation to address the crisis. Meanwhile, the government has reduced its spending to cope with the financial situation.
The government is also scaling down the size of the upcoming 2025–26 budget. Additionally, the current 2024–25 budget is being significantly slashed to a record low, which is expected to negatively impact GDP growth, according to sources from the Finance Division.
Despite seven months having passed since the fall of the autocratic regime, the overall situation in the country remains unstable. As a result, economic activities have declined, industrial production has fallen, business expansion has shrunk, and many factories have closed down. However, these closures are said to be caused by internal issues within the industries rather than government intervention.
Investment confidence at an all-time low
Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industry (DCCI), stated that there is insufficient confidence for new investments in the current situation. The investment and business environment have worsened in some areas. Consequently, long-term investment planning for the production sector is crucial.
Frequent changes in tax and revenue policies every year create uncertainty among investors. As a result, many consider investments in the trade and service sectors safer than investments in the production capital sector.
Khan believes that if the upcoming budget includes business-friendly policies and the political situation stabilizes, economic activity might recover. Otherwise, the economy could face even more challenges.
IMF forecasts prolonged economic slowdown
The International Monetary Fund (IMF) forecasts that the country’s economy is likely to remain sluggish for at least two more years before picking up pace. By the end of the current fiscal year, GDP growth could drop to 3 per cent. The interim government has also acknowledged that reduced economic and business activity has led to rising unemployment.
Fear of long-term economic instability
Industry experts warn that ongoing political disorder could jeopardize the country’s long-term economic stability. The manufacturing sector—traditionally a major driver of job creation, productivity growth, and export expansion—is experiencing a downturn, despite the expansion of the service sector.
The government has undertaken various reform programs to address the economic turmoil caused by the previous autocratic regime, but these initiatives will take time to yield results, experts said.
Meanwhile, the worsening political and law-and-order situation has increased fear among investors and industrialists, making them reluctant to commit to new investments. Foreign investment has also decreased, as both local and international investors fear potential capital loss.
Kazi Sazedur Rahman, managing director of KPC Industries, pointed out that investments are not increasing because entrepreneurs fear wasting their capital. According to the latest economic census (2024) by the Bangladesh Bureau of Statistics (BBS), the country has a total of 11.87 million economic units, with 8.77 per cent in manufacturing and 91.23 per cent in the service sector. In comparison, the manufacturing sector accounted for 11.54 per cent in 2013 and 12.14 per cent in 2003.
Between 2003 and 2013, the number of manufacturing units almost doubled, but growth slowed to just 15 per cent in the following decade. In 2003, the country had 450,348 manufacturing units, which rose to 902,583 in 2013 and only slightly increased to 1.04 million by 2024.
Experts warn that without improvements in the current situation, economic activities may face even greater obstacles.
Translated & edited by Fariha Nowshin Chinika
