Some economic growth projections have been made for Bangladesh considering its current economic realities. In the latest projections, the World Bank projects that Bangladesh’s economic growth for the financial year 2024-25 would be 4.1 percent. Previously, the Asian Development Bank’s (ADB) growth projection for Bangladesh for the same fiscal year was 5.1 percent. These indicate three things: firstly, the figures reflect the current economic realities of the country; second, although there are differences in the figures, both organizations have revised downward their previous growth forecasts; and third, economic growth projections were made only by international organizations, but not by national entities.

Bangladesh’s economy showed some weaknesses during the last financial year and this was reflected in the projections of the above organizations. For example, the ADB’s economic growth forecast for the current fiscal year has been revised downwards from 6.6 percent to 5.1 percent. Similarly, the World Bank lowered its projections for Bangladesh’s economy from 5.7 percent to 4.1 percent. Bangladesh’s slow economic growth has three dimensions: the legacy of global events of the last three to four years, recent events in Bangladesh’s economy and current events in the country. In this context, it is relevant to note that non-economic factors have a significant impact on economic growth, even though economic forces primarily drive it, and that future growth potentials should be discussed alongside current growth models.

There is no denying that, like other economies around the world, global events over the past three to four years have affected Bangladesh’s growth prospects. Covid has crippled the global economy as well as Bangladesh. This had consequences on the national economy, where people’s lives and livelihoods were at stake. The diversion of public resources to fight the pandemic reduced resources for productive and social sectors, and Covid affected Bangladesh’s exports to the outside world. For example, Bangladesh’s readymade garment industry has been badly affected due to Covid. All these factors have had an impact on the growth trend of the country. Then came the war in Ukraine, which disrupted the global supply chain. As a result, food and energy prices have increased significantly. As Bangladesh is a food and energy importing country, the global rise in commodity prices has contributed to domestic inflationary pressures, negatively affecting the country’s growth prospects.

Furthermore, the economic growth scenario during the tenure of the last government needs to be analyzed from two angles. First, the reliability and robustness of growth data: so many official growth figures were circulating, with so many revisions and projections, that it became quite difficult to rely on a single figure for each financial year. Added to this is the multiplicity of growth data published by various official entities. Second, the previous government’s economic mismanagement also made the country’s economic growth very volatile. Discretionary decisions at the state level; crises in the banking sector in terms of payment defaults, bad debts and money laundering; and lack of transparency and accountability in economic decisions and implementation have led to widespread corruption, economic uncertainties and various instabilities in the economy. Naturally, economic growth could neither prosper nor be sustained under such circumstances.

The current political structure has inherited an economy facing enormous challenges. The current state of the economy needs to be corrected as there are volatilities and instabilities. Fortunately, some downward trends have improved. For example, remittance flows increased, foreign exchange reserves improved, money laundering was largely stopped, and exchange rates stabilized. In the banking sector, measures have been taken to help banks in difficulty, reconstitute the management structure of banks and restore public confidence in the banking system.

Yet, in today’s economy, both economic and non-economic reasons have slowed down Bangladesh’s economic growth. Economically, the persistence of high inflation has had a negative impact on the growth rate. The inflation rate still remains close to 10 percent. This rate is high compared to our neighbors. Over the past two years, Sri Lanka has managed to reduce its inflation rate from 70 percent to less than 1 percent. Even though the global inflation rate is on a downward trend, the inflation rate in Bangladesh has been stuck at a high level for some time. High inflation erodes economic growth.

There has been a slowdown in economic activities due to various reasons and economic activities are not yet optimal. For example, production in the ready-to-wear industry has not yet reached its normal level. Industrial production in other sectors must recover from the disruptions it has experienced. Due to economic uncertainties, domestic and foreign investments are not arriving as desired. The banking sector is still not in good shape. The public order situation faces various vulnerabilities. As a result, there appears to be fewer opportunities for growth. The recent floods, on the one hand, have destroyed people’s lives and livelihoods as well as household wealth, and on the other hand, they have had a negative impact on the production base of the affected areas. Although the exact impact of floods on growth prospects is not yet clear, widespread flooding affecting a large region of Bangladesh is expected to affect future growth of the economy.

A slowdown in economic growth will cause the economy to contract and impact the country’s social sector. The overall economic impacts would depend on which sectors would experience the maximum effects. Over time, the manufacturing sector has led to jobless growth, but without generating job creation. In such circumstances, a sluggish industrial sector is unlikely to lead to significant job losses, while a slowdown in the services sector can have significant consequences for citizens’ employment and income. With high inflation and declining growth, social sectors such as health and education would be affected. It is the poor and marginalized who would be most affected.

These are the current realities of the Bangladesh economy. But despite all the uncertainties, volatilities and instabilities, the economy is expected to overcome all obstacles to growth in the coming days. With continued improvements in economic management across borders, Bangladesh’s economy is expected to follow an enhanced growth trajectory, with public confidence on a solid footing, higher investment from local and foreign investors, and more investment. improvements in the legal situation and order in the country. Reforms in the banking sector, stable policies in the foreign trade sector and ensuring stability in the manufacturing sector would contribute to this process. If the supply of agricultural inputs, including seeds and fertilizers, is assured, the agricultural sector could maintain its past growth rates of 4 percent. In the final analysis, if Bangladesh’s economy achieves a growth rate of around five percent, it would be considered favorable in the current circumstances.

Selim Jahan is the former director of the Human Development Report Office at UNDP in New York.

The opinions expressed in this article are those of the author.

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