GDP Growth Slows as Industrial Sector Takes a Hit

The Asian Development Bank (ADB) revised down Bangladesh's economic growth projection to 6.5% for FY2024-25 from an earlier forecast of 6.6% due to sluggish industrial growth. This projection is lower than the government's target of 6.75%. The revision came amid five days of severe economic disruptions caused by an internet outage, violence related to public job quota reforms, and a subsequent curfew. Monthly inflation rates in Bangladesh have been near double digits for the first 11 months of FY2024 and may continue due to high domestic food prices.

The revision of export earnings for the first 10 months of the outgoing financial year in Bangladesh has resulted in a significant discrepancy, with nearly $14 billion disappearing from the reported figures. Over the past two years, this discrepancy totals approximately $23 billion.

Bangladesh's economy grew by 6.12% in Q3 (January-March) of FY2023-24, recovering from the previous quarter's low of 3.78%, driven by significant growth in agriculture, industry, and services. To achieve the revised annual growth target of 5.8%, the economy needs to exceed 7% growth in the final quarter, according to the Bangladesh Bureau of Statistics (BBS).

The MasterCard Economic Institute (MEI) has revised Bangladesh's GDP growth forecast down to 5.7% for the fiscal year 2024-25, citing challenges from weak domestic and external demand. High inflation, projected to rise to 9.8% in the 2023-24 fiscal year before easing to 8% in 2024-25, is eroding consumer purchasing power.

Finance Minister projected Bangladesh's GDP growth to reach 6.75% in the upcoming fiscal year and anticipates a medium-term growth of 7.25%. In his address to Parliament, he emphasized the challenge of balancing economic stability with sustained growth, crucial for achieving Bangladesh's vision of becoming an 'Advanced-Rich-Smart' nation by 2041. The budget for FY25 reflects an 11.6% increase compared to FY24, with notable boosts of 25% for education and technology sectors and 39% for health.

The IMF projects Bangladesh's GDP growth at 6.6% for fiscal year 2024-25, aligning closely with the government's target of 6.75%. Despite recent challenges like inflation and external shocks, the economy is expected to rebound from a projected 5.4% growth in FY24.