Bangladesh economic instability and growth challenges

Bangladesh is experiencing significant economic instability characterized by a disconnect between GDP growth and job creation, alongside rising inflation and declining credit.

A World Bank report identified a ‘productivity paradox’ where economic growth has failed to generate sufficient employment. Between 2016 and 2024, approximately 2 million people entered the labor market annually, but only about 900,000 new jobs were created. Most new employment occurred in the agricultural sector, while industrial employment declined. Small firms face significant hurdles, including bureaucratic delays, electricity shortages, and limited financing.

Recent data indicates a slowdown in GDP growth, falling from 7.1 percent in 2022 to 3.5 percent in 2025. The Asian Development Bank forecasts high inflation, projecting annual averages of 8.7 percent for 2025-26 and 9.0 percent for 2026-27. Private-sector credit growth reached a 33-year low of 4.62 percent in June 2026, and imports of essential machinery at Chattogram Port fell by 45 percent between the 2021-22 and 2024-25 periods.

Newer projections suggest growth may stagnate further, reaching only 3.4 percent in FY2025-26 and FY2026-27. This downturn has contributed to a rising poverty rate, estimated to increase from 18.7 percent in 2022 to 22.5 percent in FY2025-26, affecting approximately 2.1 million people. The banking sector is also facing instability, with a non-performing loan (NPL) ratio reported at 33.2 percent of total loans as of June 2026. Industrial production remains pressured by high borrowing costs, regulatory uncertainty, and an ongoing gas and electricity crisis.