Low investment, high inflation, default loans behind growth slowdown
Weakness in the economy has been evident since the last fiscal year, and recent political upheaval and government changes have further impacted stability. Economic activity has decelerated due to volatile conditions, causing disruptions in industrial production and supply, which are still ongoing
The World Bank's estimate of economic growth reflects the current reality. The economy is facing an investment drought, with reduced resource mobilisation, increasing bank defaults, and high inflation – all contributing to a natural slowdown in growth.
Weakness in the economy has been evident since the last fiscal year, and recent political upheaval and government changes have further impacted stability. Economic activity has decelerated due to volatile conditions, causing disruptions in industrial production and supply, which are still ongoing.
Moreover, recent floods have affected people's lives and livelihoods across various regions. There remains a lack of clarity about the future, and the law and order situation has not yet normalised.
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In this environment of uncertainty, both domestic and foreign investment are discouraged, leading to few growth opportunities and no significant advancements in any sector.
A decline in growth translates to a shrinking economy, resulting in decreased per capita income and shrinking employment.
If growth slows amidst high inflation, purchasing power will diminish, leading to a decline in living standards. This will negatively impact healthcare and education costs, and dietary habits may change, with marginalised groups, especially women, suffering the most.
In light of these challenges, the government must prioritise stabilising commodity prices. Besides, it is crucial to restore confidence at all levels, including among investors, and to ensure a fair and secure environment.
Fahmida Khatun is the Executive Director of CPD
