Private credit growth hits record low amid political uncertainty, tight monetary policy: MCCI
Overall economic activities have remained subdued as investment slows
Bangladesh's overall economic activities remained largely subdued in the first quarter of the current fiscal year (FY26), weighed down by lingering political uncertainties and a contractionary monetary policy that has sharply dampened investment appetite.
In its latest Review of Economic Situation in Bangladesh (July–September 2025), released today (25 November), the Metropolitan Chamber of Commerce and Industry (MCCI) depicted an economy struggling with fading business confidence.
The most alarming sign of stagnation is private sector credit growth, which dropped to a historic low of 6.29% in September 2025, far below the Bangladesh Bank's 7.20% target for December.
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Market analysts note that overall economic activities have remained subdued in the aftermath of political uncertainties, leading to weaker demand and reduced investment, the chamber noted in its executive summary.
The country's oldest trade chamber highlighted that the central bank's tight monetary and fiscal stance, in place since August last year, has further restricted domestic demand. With the policy rate (repo) held at 10.00% to fight inflation, borrowing costs have risen, discouraging businesses from taking loans for expansion.
This weakness is reflected in the broader GDP data. Citing Bangladesh Bureau of Statistics (BBS) figures, the report said GDP growth slowed to 3.35% in the fourth quarter of FY25, down from 4.86% in the previous quarter.
Industrial performance also deteriorated. The industry sector posted a lower growth of 4.10% in the final quarter of FY25, compared to 6.91% earlier. Manufacturing growth nearly halved, falling to 4.64% from 7.51%.
Government development spending also lagged, with the Annual Development Programme achieving only a 5.09% implementation rate in the July–September quarter, hampered by bureaucratic delays following the political transition.
External sector shows signs of stability
Despite the gloomy domestic outlook, the MCCI report identified stabilising trends in the external sector. Improvements in exports, imports, and remittances helped shore up foreign currency reserves.
Remittance inflows surged 15.95% year-on-year to $7.59 billion in Q1 FY26, while export earnings grew 5.25%, led by knitwear and woven garments. The foreign exchange market also steadied, with the Taka appreciating 0.79% against the US dollar between June and September 2025.
Looking ahead to the second quarter (October–December), the chamber remained cautious.
Although inflation eased to 8.36% in September, the MCCI warned that economic recovery will remain fragile as long as political uncertainty and elevated borrowing costs persist.
