Several key economic indicators in Bangladesh continue to decline. A sustained drop in private-sector credit growth, capital machinery imports, new letters of credit (LCs), and export growth all point to stagnating investment and weakening domestic demand.
Added to this are prolonged high inflation, gas shortages in factories, and a liquidity crunch in US dollars. The closure of more than 350 small and medium factories has already created severe pressure on local production and employment.
Economists and business leaders warn that if political conflict intensifies in the midst of these dual shocks, economic recovery will become nearly impossible. They fear that rising political uncertainty could push the economy to the edge of a precipice.
Mustafa K. Mujeri, former Director General of the Bangladesh Institute of Development Studies (BIDS) and Executive Director of the Institute for Inclusive Finance and Development (InM), said that the current political and social instability is severely undermining the investment climate. “Investors are extremely cautious; no one is showing interest in new investments amid so much uncertainty,” he said.
According to Mujeri, private-sector credit growth has remained at its lowest level for a prolonged period. Foreign investment has virtually stalled, and the steady decline in capital machinery imports signals negative prospects for industrial expansion and enhanced production capacity.
“Until an effective political government is established, private-sector stagnation will not ease,” he cautioned. A deeper political crisis, he added, would significantly strain the economy, hurting growth, employment, and industrialization.
Credit Slowdown Highlights Investment Freeze
Net foreign equity investment fell by 62 percent in the June quarter. Private-sector credit growth dropped to 6.29 percent by September—its lowest in four years. Economists say the private sector is shrinking due to an unfavorable investment climate, and political uncertainty threatens to deepen the crisis.
Factory Shutdowns Push Unemployment to New Highs
According to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), 353 factories in key industrial zones have closed in the past 14 months, leaving 119,842 workers jobless. Savar saw the largest blow, with 214 factory closures and nearly 31,000 jobs lost—including at major factories such as Chain Apparels, Generation Next Fashion, and Safwan Outerwear.
BGMEA President Mahmud Hasan Khan Babu said production disruptions caused by labor unrest have spread rapidly across industrial regions. He warned that a recent decision allowing trade unions to form with just 20 workers could destabilize the sector further.
Rising bank lending rates have also discouraged investment, pushing unemployment to a record 4.63 percent in the last fiscal year’s October–December period, an increase of 330,000 people in one year.
Import and LC Activity Slump
Bangladesh Bank data shows that import LC openings totaled USD 5.64 billion in October—12.15 percent lower than the same month last year. LC settlements fell by 11.48 percent.
Analysts say reduced domestic demand, fewer new investment projects, and slower LNG imports contributed to the decline. Political uncertainty remains the biggest factor deterring large industrial groups from initiating new projects.
Bangladesh Bank’s Chief Economist Dr. Md Akhtar Hossain noted that the LC drop is not due to dollar shortages, but weaker investment demand and tighter monitoring that curbed over-invoicing and money laundering.
Growth Forecasts Weaken
The IMF expects Bangladesh’s GDP growth to reach 4.9 percent in FY2025–26, following 3.8 percent in the previous fiscal year. The World Bank and ADB forecasts hover around 5 percent, contingent on timely reforms and improvements in revenue collection, banking governance, and investment transparency.
Exports Lose Momentum
Export orders fell by USD 390 million in October compared to September. Orders from factories in Dhaka declined by 15 percent, while Chattogram saw a 26 percent drop.
Export growth for July–October stood at 8.5 percent—4.5 percent below the target. Growth in the garment sector, which contributes 85 percent of total exports, is slowing sharply.
Market Volatility Signals Investor Anxiety
Political tensions have driven many investors out of the capital market. The DSE index has fallen by 420 points over the past month, closing at 4,702 on Thursday. The CSE index has also seen significant declines.
IMF Warns of Macroeconomic Risks
In its latest assessment, the IMF warned that without bold revenue reforms and stronger financial-sector policies, Bangladesh’s macro-financial stability could be in jeopardy. It urged structural reforms to strengthen governance, reduce youth unemployment, and diversify the economy.
Path to Stability Analysts warn that Bangladesh risks losing hard-earned economic gains if timely corrective measures are not taken. Former FBCCI President Abdul Awal Mintoo said political instability makes private-sector progress impossible, stressing that economic recovery depends on restoring a business-friendly environment.
Exporters Association of Bangladesh (EAB) President Mohammad Hatem said political unrest is delaying shipments, resulting in penalties and damaging Bangladesh’s reputation. Buyers are now shifting orders to alternative countries, with new orders falling 10–15 percent in six months.
A researcher at the Centre for Policy Dialogue (CPD) noted that political violence accelerates capital flight, as investors seek safe destinations for their assets.
Economists and business leaders agree: without political stability, no economic initiative will succeed. Treasury officials believe major investment activity may resume after elections once policy direction becomes clearer.
Businesses Demand Lower Interest Rates Business leaders have renewed their demand for single-digit lending rates. A joint delegation from FBCCI, BGMEA, BKMEA, BTMA and others recently met the Bangladesh Bank Governor, arguing that current interest rates above 14 percent are unsustainable for SMEs.
High rates, they said, make it extremely difficult to remain competitive in global markets. Bangladesh Employers Federation (BEF) President Fazle Shamim Ehsan added that the current business environment is not supportive, and entrepreneurs are avoiding new investments.
