For months, Wahid Nahid Hossain, a garment worker at Trouser Land in Gazipur, has spent his days moving from factory gate to factory gate looking for work.
During the recent Eid-ul-Azha rush, he worked until 3:00am to help clear production logs.
Shortly after, production stalled, the facility closed down due to high operational costs, and his wages were left unpaid.
Today, his son’s school coaching is suspended, his wife has sold her gold earrings to buy groceries, and three months of rent remain due.
“The news says the economy is getting better,” Hossain told Dhaka Tribune. “But that good news hasn’t made it to my house.”
Hossain’s experience reflects the reality of thousands of workers, small business owners, and micro-entrepreneurs across Bangladesh.
On paper, major macroeconomic indicators are showing signs of stabilization: headline inflation is easing, foreign exchange reserves are steadying, remittance flows are strong, and export growth spiked by 26% in June 2026.
Yet, beneath these numbers, the real economy remains under pressure.
Greenfield industrial setups have slowed, private sector credit growth is hovering near decade lows, net foreign direct investment (FDI) has dropped by 44%, and industrial zones are dealing with ongoing energy issues and factory closures.
Macroeconomists note that improvements in reserves, remittances, or short-term gross domestic product (GDP) growth do not automatically mean health in the real economy.
True health is driven by brick-and-mortar investment, factory floor expansions, credit utilization, and job creation.
According to industrial leaders, the primary bottleneck is an investor confidence gap rather than a shortage of funds.
Facing high operating costs, uncertain energy access, high interest rates, and shifting regulatory frameworks, entrepreneurs are prioritizing liquidity preservation over new ventures.
The slowdown in the real economy is clearly visible in private sector credit growth, which stood at a modest 4.98% by the end of May.
In response, Bangladesh Bank lowered its December 2026 private sector credit growth target to 6.8%.
While commercial banks have seen liquidity pressures ease over the last two quarters, the cost of borrowing now ranges between 12% and 14%.
Paired with high raw material costs and energy access concerns, these borrowing rates make greenfield expansions challenging for many businesses.
June’s 26% jump in apparel export revenues provided some relief to the sector, but manufacturing leaders caution against treating a single month’s data as a full trend.
“A single month of strong export figures does not signal a full structural recovery,” explained Mahmud Hasan Khan, president of the BGMEA. “International procurement books remain volatile, and rising production costs continue to pressure margins. To sustain this momentum, the sector requires steady energy access, efficient port logistics, and predictable trade policies.”
Mohiuddin Rubel, former director of the BGMEA and Additional Managing Director of Denim Expert Limited, noted that international buyers are prioritizing supply chain reliability, energy consistency, and sustainable manufacturing practices.
However, high interest rates and gas supply issues are leading many factory owners to delay investments in new technologies and higher-value products.
FDI declines and the Vietnam model
Domestic challenges are also affecting international investor sentiment. Data from Bangladesh Bank shows that net foreign direct investment fell by 44% during the January–March quarter compared to the same period last year.
Trade analysts frequently point to Vietnam as a model for investment attraction.
Two decades ago, Vietnam and Bangladesh shared similar economic profiles.
By prioritizing regulatory consistency, automated single-window investment portals, efficient port management, and reliable energy access, Vietnam drew major multi-national tech brands, moving its export base into high-value electronics.
In manufacturing hubs like Gazipur, Savar, Ashulia, Narayanganj, and Chittagong, operational challenges remain evident.
Industrial Police records show that roughly 460 manufacturing units have closed down over the past two years, including apparel, textiles, leather, plastics, and light engineering facilities.
Mohammad Hatem, president of BKMEA, noted that low pipeline gas pressure and electricity supply issues are driving up production costs.
With global buyers reluctant to adjust purchase prices, many facilities are running at 60% to 70% capacity, operating on thin margins or at a loss simply to retain skilled workers and maintain market presence.
To address these challenges, the FY27 national budget has prioritized private sector investment and employment generation, aiming to raise total investment to 31.4% of GDP and private investment to 24.9%.
Dr Zahid Hussain, former lead economist of the World Bank’s Dhaka office, noted that while financial stimulus packages can help, long-term growth requires deeper institutional adjustments to avoid a medium-growth trap.
Fazle Shamim Ehsan, president of the Bangladesh Employers’ Federation and executive president of the BKMEA, added that building sustainable investor confidence will depend on administrative efficiency, predictable tax structures, and steady infrastructure access alongside financial incentives.