Economic activities subdued amid political uncertainty, MCCI says

Bangladesh's overall economic activities have remained subdued in the aftermath of political uncertainties, leading to weaker demand and reduced investment, even though several sectors recorded improvements owing to easing inflation and greater stability in the forex market.

"Bangladesh Bank's tight monetary and fiscal stance, in place since August last year, has further dampened domestic demand," said the Metropolitan Chamber of Commerce and Industry (MCCI) in its review of the economic situation during the July–September quarter of the fiscal year (FY) 2025–26.

The flagship report of the leading chamber, released today, said private-sector credit growth declined to a historic low of 6.29 percent in September 2025, underscoring weak investment appetite and fading business confidence.

The central bank has maintained a tight monetary policy for three years in its battle to tame inflation, which remained above 9 percent from March 2023 to May 2025.

BB has kept the policy rate — at which it lends to commercial banks — at 10 percent since October 2024 and is likely to keep it unchanged for now, although inflation has moderated in recent months.

In October, inflation was 8.17 percent, down from 8.36 percent a month earlier, according to official data.

The MCCI said the downturn in inflation is likely to continue in November and December of FY26. Inflation may drop to 8.12 percent this month and 8.05 percent in December, according to projections.

The report pointed to higher consumer prices in rural areas.

"Living in villages has become costlier in recent times, as the inflation rate in rural Bangladesh in September 2025 was higher than in urban areas."

The economic review from the chamber cited higher exports and imports during the July–September period of 2025 and projected that increased exports and imports may continue in the next quarter.

The spike in exports was mainly fuelled, as usual, by robust performance in both knitwear and woven garments, it added.

The MCCI forecast an increased inflow of remittances and relatively stable foreign exchange reserves in the October–December quarter.

The review said net inflows of foreign direct investment (FDI) in the first three months of the current fiscal year increased, but added that FDI inflow in Bangladesh is low compared to many other countries at a similar level of development.

"Bangladesh's low labour costs are generally believed to be attractive to foreign investors, yet they hesitate to make fresh investments in the country because of underdeveloped infrastructure," it said.

Shortages of energy and weak transmission infrastructure, lack of consistency in policy and regulatory frameworks, scarcity of industrial land, corruption, and non-transparent and uneven application of rules and regulations are other impediments.

"The government needs to address these impediments to attract more FDI to the country and ensure the country's economic development."

The MCCI report cited slow economic growth at 3.35 percent in the fourth quarter of the last FY25, down from 4.86 percent in the previous quarter, but said there had been "some signs of recovery".

"Improvements in exports, imports, inflation, and remittances have helped stabilise foreign currency reserves and provided some support to the broader economy," it said.