A crawling private sector poses the first big test for the next government
From construction to manufacturing, Bangladesh’s growth engines are running at idle speed. With capacity utilisation at alarming lows and private investment paralysed, the slowdown now looks structural rather than temporary
For nearly two years now, Bangladesh's private sector, the backbone of the economy and the source of over 90% of employment, has been crawling rather than growing. What began as a post-pandemic adjustment has hardened into a prolonged slowdown marked by weak investment appetite, political chaos, declining consumption and deep uncertainty over energy and finance.
As the country prepares for a new government following the 12 February election, the central economic challenge is no longer headline GDP growth. It is restoring confidence in a private sector that is operating well below capacity and increasingly unwilling to take risks.
Nowhere is this stress more visible than in construction, an industry closely tied to GDP growth, employment and investment sentiment. Cement and steel producers report capacity utilisation of just 35–40%, far below break-even levels. Real estate demand remains subdued, public infrastructure spending has slowed, and high borrowing costs have stalled private projects.
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The macro data confirm this slowdown. Construction's share in GDP fell to 8.10% in the fourth quarter of the current fiscal year from 8.53% a year earlier. For a developing economy, this is a warning sign: construction is typically a growth engine and a major absorber of low- and semi-skilled labour. Its weakness suggests that the slowdown is not merely cyclical but structural.
Investment paralysis
Despite repeated assurances of stability, private investment has struggled to gain momentum. Tight credit conditions, elevated interest rates and risk-averse banks have turned working capital into a luxury even for many companies. It is also reflected in private sector credit growth, which fell to 6.23% in October 2025 from around 14% in mid-2022.
This has produced a confidence freeze. Businesses are not just producing less; they are postponing decisions, shelving expansion plans and conserving cash. In such an environment, growth does not collapse dramatically; it erodes quietly.
Manufacturing illustrates this pattern. While the industrial sector is not collapsing, it is not expanding in any meaningful way either. Manufacturing's share of GDP continues to hover around 23–24%, showing no decisive upgrade in industrial depth or diversification. Capacity exists, but appetite for expansion does not.
Exports losing momentum
External demand, once a reliable support, has also weakened. Bangladesh's exports have declined for five consecutive months till December, despite the country enjoying tariff advantages over competitors such as India and China in the US market.
In the European Union, a major destination for Bangladeshi goods, China and India have been exporting aggressively as high US tariffs divert their shipments. Bangladeshi exporters are struggling to compete as rising domestic costs erode the benefit of preferential market access.
Exports to India, Bangladesh's closest neighbour, have also fallen. Shipments by companies such as Pran-RFL Group—particularly to northeastern Indian states—have reportedly declined by around 30% in recent months due to restrictions and operational challenges at land ports.
The message from exporters is consistent: tariff advantages alone are no longer enough. Buyers are demanding lower prices, shorter lead times and stricter compliance, while exporters face higher energy costs, volatile exchange rates and expensive finance at home.
Consumption under pressure
Energy remains the most immediate operational challenge for the private sector. Bangladesh now has an installed electricity generation capacity of over 27,000 megawatts. Yet in winter, the system struggles to supply even 10,000MW to meet demand. Industries face frequent disruptions, while gas shortages have become routine.
Domestic demand has offered little relief. Consumption has weakened across FMCG, cement, steel and protein products. Although headline inflation has eased from double digits, it remains high at around 8.5%, forcing households to cut back on discretionary spending.
The pressure is visible even in essentials. In the peak winter season, vegetables selling below Tk80 per kilogram have become rare. Food inflation has effectively become a consumption tax, and weak consumption, in turn, has become an investment tax.
Businesses respond predictably: production is trimmed, inventories are reduced and new hiring is delayed. Employment does not collapse overnight; it thins out gradually, contract by contract.
Energy is the biggest concern
Energy remains the most immediate operational challenge for the private sector. Bangladesh now has an installed electricity generation capacity of over 27,000 megawatts. Yet in winter, the system struggles to supply even 10,000MW to meet demand. Industries face frequent disruptions, while gas shortages have become routine.
Depleting piped gas supply has forced many firms to turn to alternative fuels such as CNG and LPG, significantly raising operating costs. But these alternatives are themselves unreliable. CNG stations face gas shortages, and recent disruptions in LPG supply have exposed how vulnerable industries have become.
The problem is no longer generation capacity; it is fuel availability, planning and cost structure. High-capacity payments to idle fossil-fuel plants continue to strain public finances, while unreliable energy supply undermines industrial competitiveness.
What the next government must do
Political parties contesting the 12 February election are promising to create millions of jobs if voted to power. What they must recognise, however, is that jobs are created by the private sector—not by political pledges. When the private sector stagnates, the risks extend far beyond corporate balance sheets. Weak investment translates into fewer jobs, lower tax revenues and reduced capacity for infrastructure development and public welfare spending.
The next government will inherit an economy where the private sector is not asking for incentives, but for predictability, energy security, access to credit and a proper law and order situation. Reviving growth will require a shift in priorities.
First, restoring confidence and law and order must come before chasing growth targets. Predictable policies, fewer abrupt tax or regulatory changes, and clarity on exchange-rate management are essential to unfreeze investment decisions.
Second, energy planning needs realism. Rather than adding new fossil-fuel capacity, the government should focus on securing fuel supply, rationalising capacity payments and managing reserve margins prudently. Energy uncertainty is often more damaging to investors than higher prices.
Third, credit flow to productive sectors must improve. Targeted refinancing, faster resolution of non-performing loans and a narrowing of interest rate spreads—rather than headline rate cuts alone—are needed to revive working capital and expansion plans.
Finally, controlling food inflation must be treated as a priority. Without restoring household purchasing power, domestic demand will remain weak, and factories will have little reason to scale up production.
