Bangladesh experiencing moderate stagflation: Zahid Hussain

Bangladesh is currently in a moderate stagflationary phase, marked by persistently high inflation alongside a gradual slowdown in economic growth, said Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office.

"It becomes evident when growth falls below trend levels while inflation remains elevated. By that definition, Bangladesh has shown stagflationary tendencies over the past three to four years," he said at a roundtable titled 'Is the economy trapped in a vicious cycle?' held at BDBL Bhaban in Dhaka today (24 December).

He noted that while textbook stagflation typically involves negative growth with high inflation, developing economies like Bangladesh rarely experience outright negative growth.

"Although GDP growth remains positive at around 3.5%–4%, inflation continues in the high single digits, driven mainly by exchange rate depreciation and persistent food price increases," he said.

The economist emphasised that political stability is a necessary but not sufficient condition for macroeconomic stability. Under current institutional and investment conditions, Bangladesh's potential growth is estimated at 6%–6.5%, making sustained 8% growth a highly ambitious target. 

He added that without deep structural reforms, growth is likely to remain around 4%–5%, putting the country's trillion-dollar economy target at risk.

Speaking at the event, Centre for Policy Dialogue (CPD) Executive Director Fahmida Khatun warned that Bangladesh risks being trapped in a "low-level economic equilibrium" unless persistent inflation, weak private investment, and widening inequality are addressed.

"While inflation has eased from double digits to 8.29%, wage growth has largely stagnated, meaning real incomes have declined and people's purchasing power has eroded," she said.

Highlighting findings from the Labour Force Survey 2024, Khatun pointed to a contraction in employment: total employment declined by 1.74 million, of which 1.64 million – nearly 94% –were women. 

"This clearly undermines the idea of inclusive development. Decent and productive employment is essential for reducing inequality," she stressed.

Economist Jyoti Rahman, presenting the keynote paper, said Bangladesh is at a critical economic crossroads as it aims to become a trillion-dollar economy by 2035a goal that would require sustaining roughly 8% real GDP growth for at least a decade.

Planning Commission member Dr Monzur Hossain said that achieving 8% growth until 2035 is extremely ambitious. 

"Rather than chasing a number, the focus should be on rebuilding the economic foundation by restoring macroeconomic stability and ensuring quality investment, employment, and productivity," he added.

The event, jointly organised by Voice for Reform and BRAIN, was also attended by Dhaka University professor Rashed Al Mahmud Titumir.