The temporary government successfully stabilized the economy, but now the country awaits anxiously for a turnaround post the February election. The General Economics Division (GED) released a report highlighting the nation’s current situation, describing it as standing at a critical juncture. Economists caution against the risk of stagnation rather than immediate collapse, with the Asian Development Bank revising down its growth forecast for the fiscal year to 4.7 percent from the initial 5.1 percent. This decline is significant considering the contrasting improved outlooks of neighboring countries like Pakistan and Sri Lanka.
The challenges outlined by the GED reflect an economy facing uncertainties. Investment has dwindled due to election-related uncertainties, leading to a sluggish 6.23 percent growth in private sector credit, the slowest in two decades. Companies are hesitant to act due to high borrowing costs and political insecurities. Despite a stable foreign exchange reserve, the overall economic outlook remains bleak. An economist notes that while a collapse has been avoided, the negative aspects outweigh the positive ones.
The export sector, pivotal to Bangladesh’s growth, is struggling. While authorities discuss modernizing the Chattogram port, a strike in October severely disrupted operations in the port, responsible for over 90 percent of the nation’s trade. Additionally, export growth was minimal at just 0.62 percent year-on-year from July to November. The question arises whether the reliance on the garment sector can shield against both internal disruptions and global challenges.
A key issue lies in the policy dilemma faced by the central bank. To control inflation, it has maintained high policy rates, which are essential but contribute to a detrimental cycle, according to Mustafizur Rahman from the Centre for Policy Dialogue. The high cost of capital combined with governance issues heightens the challenges for entrepreneurs, dampening investment interest. Without fundamental reforms to tackle corruption and bureaucratic inefficiencies, monetary tightening restrains growth without effectively addressing inflation.
The period of effortless economic growth is a thing of the past. During the previous regime, GDP figures were manipulated while revenue collection declined. The post-election period is crucial in determining if the economy can truly reset. Reforms must not be superficial but target substantial changes to improve governance and enhance revenue mobilization domestically. Failure to do so could lead Bangladesh into a debt trap, jeopardizing its recovery prospects. The country has a genuine opportunity to reignite economic growth, and it must be seized without delay.