What are the warning signs of a labour market slowdown?

A fortnight ago, Local independent power producers (IPPs) warned that unless at least 60% of arrears are settled promptly, producers may have no option but to shut down their plants — a move that could push the already fragile power system into deeper distress ahead of Ramadan and the peak summer season.

Labour market warning signs

The energy and investment slowdown is increasingly visible in the labour market.

The World Bank recently warned that employment fell by nearly 20 lakh between 2023 and 2024, with a further decline of 8 lakh projected in 2025. Labour incomes have weakened amid slow job creation and slower real earnings growth for less-skilled workers.

Women and youth have been hit the hardest, as job creation stagnated in manufacturing and shifted toward less productive sectors. Inflation has outpaced wage growth for poorer households, with projected 2025 price increases more than double those seen during the Covid-19 pandemic.

As a result, poverty is estimated to have risen from 18.7% to 21.2%.

For years, Bangladesh was seen as a model of steady poverty reduction. That narrative now appears under pressure.

Structural weaknesses resurface 

Yet energy is only the most visible part of a broader economic fragility.

Moynul Islam pointed to non-performing loans — reportedly exceeding 30% of total loans in the banking sector — along with corruption and extortion as additional hurdles the new government must confront.

Reviving a bureaucracy that has often appeared paralysed will be another test, he said, urging continuity in corrective measures currently undertaken by the central bank.

Dr M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, outlined four immediate priorities: consolidating macroeconomic stability, reinvigorating growth drivers, restructuring economic governance and implementing time-bound reforms.

"The macroeconomy has seen some stability recently, but that must be consolidated further, especially given persistently high inflation, weak investment and sluggish imports," Masrur said.

Private investment has fallen to 22% of GDP. Small and micro enterprises — still reeling from the Covid-19 pandemic — remain under severe stress. Reviving these growth engines will be critical to restoring momentum.

Masrur stressed the need for a time-bound reform programme encompassing economic governance, customs modernisation, tax rationalisation and trade facilitation — reforms essential to attract investment and boost exports.

Recovery will take time 

Even so, expectations of a swift turnaround may be unrealistic.

Dr KAS Murshid, former director general of BIDS, cautioned that economic and institutional recovery will not happen overnight.

"Though the new government will inherit a better foundation than what the interim government had, it will take around two years to see meaningful recovery," he said.

For now, however, the message from industry is unequivocal: stabilise energy supply, clear arrears, restore policy predictability.

Everything else — investment, job creation, growth — may follow.

But without reliable power and gas, recovery risks remaining a promise rather than a prospect.