WorldPosted at: Oct 8 2026 6:51PM


Bangladesh economy state raises concern among traders and economists amid weak investment and sluggish growth

Dhaka, Oct 8 (UNI) The World Bank's latest assessment regarding Bangladesh's current economic situation has raised concerns among the country's businessmen and economists, as it continues facing mounting pressure from weak investment, falling employment, rising poverty, sluggish growth and persistent energy shortages, which they feel prompts the need for urgent reforms.
According to the body, the country's real GDP growth fell to 3.4% in the 2025-26 fiscal year, while growth in the third quarter slowed to around 2.2%, the lowest quarterly rate since the Covid-19 pandemic. Growth had stood at 5.8% in 2022-23.
The slowdown was driven largely by weaker investment. Private investment fell 0.5% and public investment 0.7% during 2025-26, while real exports of goods and services declined 4.8%. Annual Development Programme implementation also fell to a record low.
Gas and electricity shortages have similarly left factories operating below capacity, with some cutting working hours, suspending production or laying off workers.
Md Fazlul Hoque, administrator of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the World Bank's assessment should be taken seriously.
"There may be debate over the growth rate, but broadly speaking, the information the World Bank has provided on the economy and investment situation should be taken seriously," he said.
Hoque called for greater attention to gas and electricity supplies, including bringing new gas fields into operation and introducing policy and strategic reforms to encourage investment.
Former National Board of Revenue chairman Muhammad Abdul Majid said the economic situation was disappointing, with the anticipated recovery in investor confidence and private-sector activity failing to materialise.
Syed Ershad Ahmed, former president of the American Chamber of Commerce in Bangladesh, said the investment climate remained unfavourable and urged the government to prioritise law and order and political stability.
Investors also need improved infrastructure, reliable power and energy supplies and more efficient ports, he said, adding that foreign investment brings capital as well as technology, management expertise, skills and employment.
Industrial growth stood at around 2% in 2025-26, according to the World Bank, while industrial production contracted 0.3% in the third quarter, marking the sector's first quarterly contraction since the pandemic.
Bangladesh's gas shortage has also worsened, with imports meeting around one-third of total demand. The World Bank said heavy dependence on several major gas fields and the floating LNG terminal at Maheshkhali leaves the wider supply system vulnerable to disruptions.
Inflation remains elevated despite easing from an average of 10% in 2024-25 to 8.7% in the last fiscal year. Point-to-point inflation stood at 8.3% in August.
Higher government borrowing, subsidies and interest payments, alongside increased remittances, have not translated into a significant rise in private-sector credit or productive investment.
The World Bank estimated that Bangladesh's poverty rate rose for a fourth consecutive year, from 18.7% in 2022 to around 22.5% in the last fiscal year, with about 2.1 million people falling below the poverty line during the year.
The banking sector remains another major concern. The World Bank described weaknesses in the sector as one of the most serious risks to the economy, with the share of non-performing loans rising from 20.2% at the end of December 2024 to 33.2% in June 2026. The ratio stood at 58.9% in Islamic banks and 43.2% in state-owned commercial banks.
The banking sector's aggregate capital ratio fell to negative 2.6% in December 2025, compared with the minimum regulatory requirement of 10%. Private-sector credit growth fell to 4.5% in June, its lowest level in 33 years, while government credit growth reached 30.4%.
Economist Dr Biru Paksha Paul, a professor at the State University of New York, said stronger investment was essential for economic recovery. He called for a review of existing policies, necessary reforms and renewed engagement with the wider business community.
Private investment has contracted for a second consecutive year amid high interest rates and energy shortages. Foreign direct investment fell 15% to $1.5 billion, while new equity investment declined 70.3%.
Hoque also called for stronger action against extortion and other forms of harassment affecting businesses. He said Bangladesh Bank's incentives for reopening industrial units were positive, but their impact was being limited by commercial banks' reluctance to provide financing.
Remittances remain a bright spot, with Bangladesh receiving a record $35.6 billion in the last fiscal year, helping strengthen foreign exchange reserves.
Economists and business leaders, however, said stronger investment and a more business-friendly environment would be needed to convert remittance inflows and other gains into sustained economic growth and employment.
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