Economy gradually recovering after July-August movement: MCCI

The Metropolitan Chamber of Commerce and Industry (MCCI) has said the economy has been gradually recovering despite the political instability after the July-August movement.

In its quarterly economic review for July-September 2024 (Q1 of FY25) revealed today (28 November), the MCCI said the country saw improvements in exports, imports, remittances, and foreign exchange reserves despite many economic challenges during July-September.

It has identified several pressing economic challenges including high inflation, declining external demand, a revenue shortfall, slow public expenditure, reduced job opportunities, and sluggish investment.

MCCI also called for restoring law and order as it has become "an urgent priority."

The agriculture sector employed about 45% of the labour force and contributed 12.84% to GDP in Q4 of FY24, up from 9.41% in Q3 of FY24. Strong government support and favourable natural conditions, aside from localised flooding, enabled the sector to achieve a growth rate of 5.27% in Q4 of FY24, slightly higher than the 5.16% growth in Q3, said a press release.

It said while data for Q1 of FY25 is pending, the industrial sector experienced slower growth of 3.98% in Q4 of FY24, down from 6.25% in Q3. The sector's GDP share also fell to 35.38% in Q4 from 40.50% in Q3. The manufacturing sub-sector showed a similar trend, with growth declining to 6.45% in Q4 from 6.93% in Q3.

The services sector grew by 3.67% in Q4 of FY24, slightly down from 3.81% in Q3. However, its GDP contribution increased to 51.78% in Q4, up from 50.09% in Q3, it added.

Data from the Bangladesh Power Development Board (BPDB) indicates that power generation reached a maximum of 15,717 MW on 20 September.

On 30 September, actual generation was 13,176 MW against a demand of 13,946 MW, resulting in 340 MW of load shedding.

Broad money (M2) growth slowed to 7.88% in September 2024, below the central bank's target of 8.20%.

Private sector credit grew by 9.20% year-on-year, falling short of the 9.80% target. Public sector credit growth plummeted to 8.75%, compared to 26.27% in September 2023.

Tax revenue collection decreased by 6.07% year-on-year in Q1 of FY25, with significant shortfalls in VAT and customs revenue.

Public expenditure also slowed, with ministries and divisions spending only 4.75% of the annual development program (ADP) allocation during the quarter, compared to 7.50% in the same period last year, it said.

Export earnings grew by 7.62% year-on-year to $11.66 billion in Q1 of FY25, while imports rose by 1.64% to $16.17 billion. Remittances surged by 33.34% to $6.54 billion, driven by higher inflows in September 2024.

General inflation eased slightly to 9.92% in September 2024 from 10.49% in August. Food inflation dropped to 10.40%, while non-food inflation stood at 9.50%. Rural areas were disproportionately affected by high inflation compared to urban regions.

The Bangladeshi Taka depreciated by 1.67% against the US dollar between June and September 2024. Gross foreign exchange reserves stood at $24.86 billion in September, down from $26.91 billion a year earlier.

Foreign direct investment (FDI) inflows declined by 15.01% year-on-year to $300 million in Q1 of FY25.

While signs of recovery are evident, significant challenges remain for Bangladesh's economy, said MCCI.

It stressed the need for addressing structural inefficiencies and improving governance will be crucial to sustaining growth in the coming quarters.