Bangladesh’s investment climate has come to a standstill, as it is undergoing a subdued investment climate that is foreshadowing potential headwinds for future economic growth and job creation, said the Policy Research Institute of Bangladesh (PRI) in a study published on Thursday.
According to its June–July 2025 issue of Bangladesh Monthly Macroeconomic Insights (MMI), this is evidenced by a 20-25% decline in capital machinery imports and a significant slowdown in construction sector growth.
It also stated that the construction sector, a leading indicator, accounts for 73% of total investment and averaged 7.7% growth over the past five years; its current deceleration underscores a broader investment stagnation.
The study, prepared under PRI’s Centre for Macroeconomic Analysis (CMEA) initiative in partnership with the Department of Foreign Affairs and Trade (DFAT) of the Australian Government, was released on Thursday at an event held at PRI’s Dhaka office.
Ashikur Rahman, principal economist at PRI, delivered the keynote presentation.
He said: “The challenging investment climate has been one of the most serious impediments to economic growth in Bangladesh in recent years. Without addressing deep-rooted constraints in energy supply, logistics, and political uncertainty, it will be difficult to unlock new investment opportunities.”
“In this context, it is neither accurate nor sufficient to singularly attribute slower growth to a tight monetary stance. The evidence suggests that unless structural bottlenecks in the real economy are tackled alongside financial policies, Bangladesh cannot meaningfully stimulate investment and sustain growth,” he also explains.
The presentation also showed that Bangladesh’s investment trends, both private and public sector, were gradually falling as a percentage of GDP.
He added: “Industrial production rose slightly in June but remained weak, while the ready-made garment and mining sectors underperformed.”
He also said that electricity generation in July fell 1.0% year-on-year, reflecting the sluggish overall growth.
“To meet rising energy demand and boost gas-based power generation, the government increased LNG imports by 43% in June, while electricity imports rose 13% over the same period.”
Regarding inflation, he stated: “Headline inflation increased marginally to 8.55% in July on the back of food price pressures, though the broader trend suggests moderation; however, the 12-month average remains elevated at 9.77%.”
“The external sector staged a notable turnaround in the last fiscal year, posting a $3.4 billion balance of payments surplus after three years of deficits, supported by record remittances and strong exports, with reserves reaching $25 billion, covering 4.5 months of imports,” he also highlights.
Bleak image for businesses
Anwar-Ul-Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said that cottage, small, and medium industries are closing down. Many people associated with these industries are committing suicide.
“Bata has never lost in business in the last 60 years, but this time it is making losses. Companies like Singer also made losses.”
He also said that retail shops are closing, small enterprises in rural areas are shutting down, and major companies are reporting 35–40% lower profits.
“Many garment factories are closing down. People are becoming unemployed. As a result, theft, robbery, and extortion have increased. We are now waiting for a political government. So that political stability comes. We think that we are not ready for LDC transition at this moment. Therefore, it is important to postpone LDC,” he added.
Mohammad Akhtar Hossain, chief economist of Bangladesh Bank, attended as chief guest.
He said: “The major challenge the country is facing is high inflation, currently at around 9%, and efforts are underway to bring it down by 3% swiftly. Once this target is achieved, long-term monetary policy measures will be implemented to maintain inflation around 4% with some short-term fluctuations.
Special guests at the event included Dr. Ahmad Ahsan, Director of PRI, and Mr. Joshua Gacutan, Second Secretary (Economic) at the Australian High Commission.
The governor emphasized that political uncertainty has adversely affected investment and growth, underscoring the need to ensure stability through the upcoming election.
He also drew attention to the rising unemployment crisis, noting that nearly 3 million people, mostly women, left employment in 2024.
“With a large portion of the population deprived of income, poverty has risen nationwide.”
Ahsan expressed hope that the interim government would prioritize addressing these pressing challenges during its tenure.