Economic Challenges and Prospects for Business Growth in Bangladesh
Bangladesh’s economic growth has slowed due to high costs and political uncertainty, according to industry experts. Despite challenges, cautious improvements in the banking sector and significant potential for export diversification are noted. GDP growth remains low, particularly in manufacturing. A comprehensive strategy focused on skill development and low-cost financing is deemed essential for reviving business expansion.
Recent analyses indicate that Bangladesh’s economic growth has encountered a downturn, attributed primarily to elevated interest rates, soaring energy costs, and persistent political instability. Trade leaders and economists assert that these factors, combined with a vast labor pool, hinder business expansion in the country.
Zakir Hossain Nayan, the Convener of the Anti-Discrimination Business Forum at the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), indicated that high interest rates and an increasing US dollar exchange rate are adversely impacting the domestic business sector. He noted, “People have reduced their consumption due to high inflation within their income limitations,” and elaborated that July and August witnessed a significant decline in internal trade, with signs of gradual recovery observable now.
The liquidity crisis within banks has been exacerbated by mismanagement of banking policies by previous administrations, leading to a situation where numerous banks are unable to fund new ventures. This has raised concerns about business growth stagnation for the latter half of 2024. However, improvements are noted with increased government liquidity in the banking sector, alleviation of the dollar crisis, and a decrease in inflation.
Taskeen Ahmed, President of the Dhaka Chamber of Commerce & Industry (DCCI), reported a mere 1.8% GDP growth in the first quarter of the current fiscal year, with a marginal manufacturing sector increase of 1.43%. He underscored the need for skill enhancement in the SME sector, affordable credit access, free trade agreements, infrastructure progress, and policy reforms amidst the country’s impending transition from the Least Developed Country status.
Moreover, Khandoker Rafiqul Islam, former President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), commended the garment sector’s recent ability to meet export targets. However, he cautioned that continued success relies on rectifying high costs and energy supply disruptions, which currently hinder the domestic textile sector.
The latest Bangladesh Purchasing Managers’ Index (PMI) indicated a 1.1-point decline in February, suggesting a deceleration in growth rates for construction and services, although agriculture and manufacturing sectors continued robust gains. The PMI findings illustrate prolonged expansion within agriculture and manufacturing, despite challenges in other sectors.
M Masrur Reaz, Chairman and CEO of Policy Exchange, highlighted ongoing weaknesses in business confidence, primarily attributed to sluggish demand and energy supply issues, asserting that recovery efforts will necessitate enhanced governance, political stability, and prompt reform implementations.
In conclusion, Bangladesh’s business landscape is currently experiencing challenges due to high operational costs, liquidity constraints, and political uncertainty. While various sectors show resilience and the government is taking steps to improve conditions, sustained economic recovery will require comprehensive policy reforms, investment in skills development, and a safer political environment to foster growth and enhance business confidence.
Original Source: unb.com.bd
