Fitch Solutions Projects 8.5% Inflation for Bangladesh in FY25

The private sector in Bangladesh is under pressure due to persistent inflation (over 9% since March 2023), high borrowing costs, and energy shortages. Private investment has stagnated at 24% of GDP, while FDI has hit a six-year low.

Fitch Solutions forecasts Bangladesh’s inflation to average 8.5% in FY2024-25, exceeding Bangladesh Bank’s 7.0-8.0% target. Despite maintaining a 10% policy rate, inflation remains high due to political unrest and economic uncertainties.

Inflation in Bangladesh eased to 9.94% in January, down from 10.89% in December, marking the second consecutive monthly decline, according to BBS data. Food inflation dropped to 10.72% from 12.92%, driven by an abundant supply of winter vegetables.

In 2024, severe droughts, floods, and cyclones disrupted agriculture in Bangladesh, damaging crops and increasing costs for fertilisers, seeds, and irrigation by 10-50%. Rising production costs, coupled with a surging dollar exchange rate (Tk 110 to Tk 129), drove food inflation above 13.8%, straining both farmers and consumers.

In 2024, Bangladesh experienced its highest inflation in 13 years, with a 12-month average rate of 10.22%. Rising food and essential goods prices strained low- and middle-income households, forcing many to cut spending on health, housing, and education.