GDP grows 3.97% in FY25, lowest since Covid: Provisional BBS data

Infographic: TBS

According to the provisional estimates for the fiscal 2024-25, Bangladesh's GDP growth rate has slowed to 3.97%, compared to 4.22% in the previous fiscal year.

The Bangladesh Bureau of Statistics (BBS) released the provisional GDP data on its website today (27 May).

The growth rate is the lowest since the post-Covid period. During the pandemic, in FY20, the growth rate dropped to 3.45%.

The government had set a growth target of 5.25% for the current fiscal year. 

While the agriculture and service sector experienced a slowdown, manufacturing sector saw a rise in growth compared to the same period in the last fiscal year.

Due to the political transition and resulting uncertainty in the current fiscal year, development partners had earlier predicted a slowdown in growth. The World Bank had projected a growth rate of 3.3%, while the International Monetary Fund (IMF) forecasted 3.8%, and the Asian Development Bank (ADB) estimated 3.9% growth for the same period.

As per the latest estimates, the size of the GDP at current prices for FY2024–25 stands at Tk55,52,753 crore (approximately $462 billion), up from Tk50,02,654 crore ($450 billion) in FY24.

The agriculture sector experienced a notable slowdown in FY2024-25, with a provisional growth rate of 1.79%, compared to 3.30% in FY2023-24. This marks a year-on-year decline of 1.51 percentage points, signaling pressure on rural output and food production.

The industry sector showed signs of recovery, posting a growth rate of 4.34% in FY2024-25, up from 3.51% in the previous year. This reflects an increase of 0.83 percentage points, driven by gradual improvements in manufacturing and construction activity.

The services sector, while still leading in contribution to GDP, registered a growth rate of 4.51% in FY2024-25, slightly lower than 5.09% in FY2023-24. This represents a decline of 0.58 percentage points, indicating a modest slowdown in service-driven economic activities.

Savings and investment ratios to GDP

According to the provisional data for the fiscal 2024-25, the investment ratio to GDP stood at 29.38%. Domestic savings accounted for 23.25%, while national savings were recorded at 29.01%.

In comparison, the final figures for FY24 showed investment at 30.70%, domestic savings at 23.96%, and national savings at 28.42%.

This indicates that, compared to the previous year, investment declined by 1.32 percentage points, and domestic savings fell by 0.71 percentage points. However, national savings increased by 0.59 percentage points.

Per capita income

Provisional data reveals that per capita income in FY25 reached approximately $2,820, which is record-high per capita income, rising from $2,738 in FY24. This marks an increase of $82.

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, said, "The main reason for the decline in agricultural growth is natural disasters. The flood in August last year damaged the Aman crop. 

"On the other hand, the manufacturing sector performed better than the previous fiscal year. Although the country's instability has not fully subsided, industrial growth has been strong even amid so many challenges"

The economist further said, "However, the figures given by BBS are provisional. This level of industrial growth is possible, but only from an optimistic point of view. Given the situation we are in, it's uncertain whether growth can be sustained in the long run based solely on exports, since exports make up only 40–45% of our manufacturing." 

"Industry also includes construction, and that sector is not doing well. This is why the industrial growth figure seems optimistic," he observed.

Zahid Hussain said the slowdown in the services sector can be explained by disruptions.

The BBS's direction – that growth is slowing this fiscal year compared to the last – is correct, he stated. 

"That aligns with projections from the World Bank, IMF, and ADB. But there are questions about some of the numbers. For instance, the public investment figure shown under expenditure is Tk38,29,834 crore. This year, the government and state-owned enterprises (SOEs) together invested around Tk2,65,000 crore, and the revised budget shows an even lower amount. 

"So where is this Tk38,29,834 crore in public investment coming from? The numbers don't add up. Even if we include local government spending, public investment shouldn't be that high. Local government investment is usually very low. Therefore, the public investment figure is questionable," he noted.

"Moreover, the data presented for private investment shows growth in both real and nominal terms. But the proxy data for capital machinery shows negative growth. Both LC (letter of credit) settlement and LC openings are in the negative. A 1.76% growth in total capital formation is being shown. Are we manufacturing capital machinery domestically and investing that way? We don't really have such a situation. So some of these projections are questionable. However, this cannot be called manipulation – rather, the forecasts are optimistic," Zahid Hussaind observed.

Selim Raihan, professor of the department of Economics, University of Dhaka said the provisional GDP growth figures don't seem unrealistic. 

"We had expected this level of growth. The decline in growth has occurred because large-scale investments have fallen. However, when we look at the investment figures, we see that investment hasn't actually decreased that much. Sometimes investments do take place, but the returns may not be visible," the professor said.

He noted that agricultural growth appears to be accurate. The industrial growth that has been reported is mainly due to a recent rise in ready-made garment exports.

"But the problem lies in the methodological flaws that still persist in GDP calculation. A large portion of GDP is based on assumptions. These estimates are made using assumptions rather than updated or actual data. Because proper data is lacking, the figures are based on assumptions, which increases the possibility of errors," said Selim Raihan, also the executive director of the South Asian Network on Economic Modeling (SANEM).

"Now perhaps there is less manipulation than before, but GDP is still being calculated using flawed methods and incorrect assumptions, just like in the past," he said.

"These are the same issues we, the White Paper Committee, highlighted in the report. We recommended reforms, but those have yet to be reflected in the current growth estimates. The same outdated figures are still being used, with no review or revision. We had called for the establishment of an independent data commission. Without such a body, it will not be possible to ensure credible data," the economist concluded.