Bangladesh’s economic growth is experiencing a notable slowdown, primarily impacting the RMG sector, which is grappling with high costs, energy supply issues, and political uncertainty. Experts and trade body leaders have expressed concerns that these factors are hindering the expansion of the domestic business environment, despite the country’s significant labor force.
Zakir Hossain Nayan, Convener of the Anti-Discrimination Business Forum at the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), highlighted that high interest rates and a climbing US dollar exchange rate are straining businesses. He noted that increased inflation has led to reduced consumer spending, severely impacting internal trade during July and August last year. Although there are signs of recovery, Nayan warned that business growth is likely to remain weak throughout the second half of 2024.
Despite these challenges, the RMG sector has shown resilience, managing to meet export targets by operating at full capacity in recent months. Khandoker Rafiqul Islam, former President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), emphasised that while current export performance is robust, sustaining this momentum will be challenging if high costs and unreliable energy supplies persist.
The latest data reflects a mixed economic outlook. The Bangladesh Purchasing Managers’ Index (PMI) reported a slight decline in February, indicating slower expansion in construction and services, although the agricultural and manufacturing sectors continued to grow. The RMG sector, in particular, is under pressure from rising production costs and capital shortages, putting future growth at risk.
Taskeen Ahmed, President of the Dhaka Chamber of Commerce & Industry (DCCI), pointed out that the GDP growth for the first quarter of the current fiscal year was only 1.8 per cent, with the manufacturing sector growing at a mere 1.43 per cent. He stressed the importance of implementing policies that promote diversification in exports beyond the garment industry, highlighting sectors such as pharmaceuticals, leather goods and information technology.
To overcome these obstacles, experts are calling for comprehensive reforms, including skill development in the SME sector, greater access to low-cost credit, infrastructure improvements to attract foreign direct investment, and fostering a supportive political environment. They argue that a collaborative approach between the Government and the private sector is essential to revive business growth and ensure the long-term sustainability of the RMG sector.
As Bangladesh approaches its graduation from the Least Developed Country (LDC) category in 2026, the focus on establishing a robust economic framework is more crucial than ever, particularly for one of its most vital industries.
