Inflation, political uncertainty most pressing concern for Bangladesh in 2025: EIB

While remittance inflows and export growth offer promising signs, inflation and political uncertainty emerged as the most pressing concerns for Bangladesh in 2025.

This is what economists predicted about Bangladesh's economic trajectory in a survey titled "Economists' Economic Outlook for 2025" by Economic Intelligence Bangladesh (EIB), a joint research initiative by DataSense and The Business Standard.

Measures by the central bank to control inflation were rated only moderately effective, indicating scepticism about their impact.

Global factors such as geopolitical tensions and trade dynamics were identified as critical external influences, with 95% of respondents highlighting their importance.

In the survey, the India-Bangladesh economic relationship and evolving global trade policies were flagged as key determinants of future economic performance.

The survey gathered insights from 20 economists across government, private, and academic sectors between November 2024 and January 2025.

It found Bangladesh's economy plunging into uncertainty, created by continuing inflationary pressures, political uncertainty, and global economic and geopolitical shifts.

The survey found 40% of respondents citing inflation as the primary challenge, fearing that the persisting inflation, projected to exceed 10% in 2025, would increase the cost of living further and threaten macroeconomic and socio-political situation stability.

Mixed confidence

According to the survey, economists expect Bangladesh's GDP growth in the range between 3% and 5%, driven primarily by strong remittance flows and resilient export performance, particularly in the manufacturing sector.

However, political instability and high inflation are anticipated to constrain economic progress.

The interim government's initiatives to boost GDP growth also reflected mixed confidence in their outcomes.

Providing a comprehensive analysis of Bangladesh's economic landscape for 2025, economists rated the country's overall economic outlook at a weighted average of 5.5 out of 10, reflecting a balance between hope and apprehension.

Bangladesh's impending graduation from the Least Developed Country (LDC) category in 2026 also looms large, with risks including the loss of duty-free market access and increased compliance costs.

Economists emphasised the urgent need for strategic planning to address these challenges and sustain export competitiveness.

The banking sector remained a major concern, plagued by systemic issues such as rising non-performing loans (NPLs). Economists rated the sector's performance at a worrying 2.6 out of 5, underscoring a lack of confidence in its turn-around.

Additionally, domestic and foreign investment levels are expected to remain subdued, with economists expressing low optimism.

Job creation has been forecasted to stagnate, with 45% of respondents predicting no significant changes and 25% anticipating a moderate decline. These trends underscore the need for targeted policies to stimulate investment and employment growth.

Signs of hope

Despite these challenges, foreign reserves are expected to experience moderate growth in 2025 (65% of economists opine that), driven by reduced luxury imports, increased remittance inflows, and timely export earnings.

However, confidence in revenue growth remained low, with 85% of economists expressing doubts. Increased reliance on foreign funding is likely to shape the national budget for FY2025-26, with most economists (70%) predicting little change in its overall size.

The survey highlighted the intricate interplay of domestic and international factors shaping Bangladesh's economic outlook for 2025. 

While there are pockets of cautious optimism, the overarching narrative is one of significant challenges requiring immediate and strategic policy interventions.

From combating inflation and ensuring political stability to preparing for LDC graduation and reforming the banking sector, Bangladesh must adopt decisive measures to navigate uncertainty and achieve sustainable growth.