Some predictions of economic growth have been made for Bangladesh given its current economic realities. In its latest forecast, the World Bank has forecast Bangladesh’s economic growth for the fiscal year 2024-2025 to be 4.1 percent. Earlier, the Asian Development Bank’s (ADB) growth forecast for Bangladesh for the same fiscal year was 5.1 percent. These indicate three things: first, the figures reflect the current economic realities of the country; second, even if there are differences in numbers, both organizations have downgraded their previous growth forecasts; and, third, economic growth projections were made only by international organizations, but not by national entities.

The economy of Bangladesh showed some weakness in the last fiscal 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 downgraded from 6.6 percent to 5.1 percent. Similarly, the World Bank lowered its estimate for Bangladesh’s economy from 5.7 percent to 4.1 percent. Bangladesh’s sluggish economic growth has three dimensions: the legacy of global events over the last three to four years, the happenings in Bangladesh’s economy in the recent past, and current events in the country. In this context, it is pertinent to note that non-economic factors have a strong impact on economic growth, even though economic forces mainly drive it, and future growth potentials must be discussed along with current growth patterns.

It cannot be denied that like other economies of the world, the global events of the last three to four years have affected Bangladesh’s growth prospects. Covid has crippled the global economy as well as Bangladesh. It had an impact on the domestic economy where people’s lives and livelihoods were at stake. The diversion of public resources to deal with the pandemic has reduced resources for both the productive and social sectors, and Covid has affected Bangladesh’s exports to the outside world. For example, the RMG industry in Bangladesh has been badly affected by Covid. All these factors influenced the growth trend of the country. Next comes the war in Ukraine, which has disrupted the global supply chain. As a result, food and energy prices have risen considerably. As Bangladesh is a food and energy importing country, global increases in commodity prices have contributed to domestic inflationary pressures, adversely affecting the country’s growth prospects.

Furthermore, the economic growth scenario during the tenure of the last government should be analyzed in terms of two aspects. First, the reliability and robustness of growth data — so many official growth figures used to be floating around, with so many revisions and projections that trusting a single number for any fiscal year became quite difficult. Added to this is the multiplicity of growth data published by various official entities. Second, economic mismanagement by the past government also made the country’s economic growth quite volatile. Discretionary decisions at the state level; banking crises in terms of non-performing loans, non-performing loans and money laundering; and the absence 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 thrive nor be sustained under such circumstances.

The current political structure has inherited an economy with huge challenges. The current state of the economy needs to be fixed as there are volatilities and instabilities. Fortunately, some downward trends have improved. For example, remittance flows have increased, foreign reserves have improved, money laundering has been largely stopped, and exchange rates have stabilized. In the banking sector, steps have been taken to help failing banks, reconstitute the management structure of banks and restore people’s faith and trust in the banking system.

However, in the current economy, there are both economic and non-economic reasons that have slowed down economic growth in Bangladesh. On the economic front, continued high inflation has had a negative impact on the growth rate. The inflation rate still remains close to 10%. This rate is high compared to our neighbors. In the last two years, Sri Lanka has managed to reduce its inflation rate from 70% to less than 1%. Even though the global inflation rate is on a downward trend, the inflation rate in Bangladesh is stuck at a high level for quite some time. High inflation erodes economic growth.

There has been a deceleration in economic activities due to various reasons, and economic activities have yet to be optimal. For example, production in the RMG industry has not yet reached normal levels. Industrial production in other sectors must recover from disruptions, he said. As there are economic uncertainties, both domestic and foreign investments are not coming as desired. The banking sector is still not in good shape. The law and order situation faces various vulnerabilities. As a result, there appear to be fewer opportunities for growth. The recent floods have on the one hand destroyed people’s lives and livelihoods as well as household wealth and on the other hand adversely affected the production base of the affected areas. Even though the exact impact of the floods on growth prospects is not yet clear, widespread flooding across a large area of ​​Bangladesh is expected to affect future economic growth.

A slowdown in economic growth will shrink the economy and impact the country’s social sector. The overall economic impact would depend on the sectors experiencing the maximum effects. Over time, the manufacturing sector has led to increased unemployment without creating new jobs. In such a circumstance, a sluggish industrial sector may not lead to large job losses, while a slowdown in service sectors may have a significant impact on people’s jobs and incomes. With high inflation and declining growth, social sectors such as health and education would be adversely affected. In the process, the poor and marginalized would be the most affected.

These are the current realities of the Bangladeshi economy. But even with all the uncertainties, volatilities and instabilities, the economy is expected to overcome all the obstacles to growth in the coming days. With the continuous improvement of economic management at all frontiers, the economy of Bangladesh is expected to be on a higher growth trajectory with the trust and confidence of the people on a solid foundation, higher investment by both local and foreign investors and further . improvements in the law and order situation 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 ensured, the agricultural sector can maintain its previous growth rates of four percent. In the final analysis, if Bangladesh’s economy achieves a growth rate of about five percent, it would be considered favorable under the current circumstances.

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

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

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