THE findings of a government report that the economy is at a critical juncture despite some stability come with serious causes for concern. The General Economics Division has prepared the Bangladesh State of the Economy 2025, made public on December 8, to review economic performance over the past year, with a focus on the progress of economic reforms and recovery. The report has been prepared against the backdrop of persistent inflation, slow growth, declining real wages, stagnant employment, weakened exports, depressed investment and growing poverty. The report says that the government has taken measures to strengthen the macroeconomy, which had already been adversely affected by soaring inflation, currency devaluation and declining foreign exchange reserves amidst growing inequality and mismanagement during the previous Awami League regime, which fell on August 5, 2024. The report describes the expansion of mobile financial services and electronic commerce as positive signs but says that the economy still faces challenges because of limited reserves and strained investor confidence. Experts say that whilst the economy has shown both strengths and weaknesses, the negative indicators still outweigh the positive ones, noting that reforms should be sustained for a fully-fledged economic recovery.
Inflation remains high, in the range of 8–9 per cent in the 2024–25 financial year, driven by food price shocks, import cost pressure, energy costs and supply chain disruptions. All this, in turn, reduces real income, which has affected the low-income and rural livelihood. Foreign direct investment has remained critically low and constrained investment and industrial activities have contributed to slow growth. The report highlights chronic low revenue mobilisation as the main obstacle to the government’s increasing public investment in essential sectors such as education, health and human resources. The ratio of tax to gross domestic product has ranged between 7 per cent and 8.5 per cent for about a decade, suggesting a slowdown in tax collection efficiency relative to economic output. Declining revenue income has also put at risk the government’s capacity to repay loans, warranting the need for an expanded income base to ensure inclusive growth and avoid the risk of falling into a debt trap. The report also gives direction, noting that job creation, poverty reduction and improved living standards would largely depend on policy choices. The government should target inflation with accommodative monetary policy, reform financial intermediation, implement an effective regulatory framework, improve governance and promote greater inclusivity.
The report says that strong manufacturing sectors, increased remittance inflows and investment in human capital could help the government to tackle vulnerabilities such as inflation, financial instability, weak investment climate, governance challenges and external risks. The government should not, therefore, be complacent about the achievements it has made because negative indicators still outweigh positive gains. It should act urgently on the issues that the report has identified for a full economic recovery.
