Major economic indicators showing signs of improvement: MCCI

Three major indicators of the economy -- imports, remittances and foreign exchange reserves -- are likely to increase in the first quarter of the current fiscal year, showing a sign of improvement in the external accounts, according to the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI).

The country's monthly imports may hit $5.68 billion in September, up from August's projection of $5.51 billion and July's estimated import bill of $5.39 billion, the chamber said today in its quarterly economic review.

Similarly, remittances may grow to $2.29 billion in the next month from $2.18 in August.

And inflation, which hit 11.66 percent in July, the highest in 13 years, is expected to ease this month and next month, the leading trade body said.

"The Bangladesh economy is trying to overcome the difficulty due to the present conflicting world scenario. Therefore, the performances of the selected economic indicators are mixed," said the chamber.

Bangladesh's overall forex reserves may rise to $27.95 billion at the end of September, it said.

The MCCI did not project exports as the Export Promotion Bureau refrained from publishing export statistics for the next three months from June after correcting the data mismatch.

Imports and remittances may decrease in July due to the present slowed-down economy and then may increase in the next two months, the chamber said, adding that the foreign exchange reserve may decrease in July due to the payment of $1.42 billion for the May-June period through the Asian Clearing Union (ACU).

"Inflation, however, increased in July and then expected to down in August and September of 2024," it added.

The MCCI said the economy showed some signs of improvement with the increase of foreign exchange reserves and remittances in June of the current year.

Later on, the country witnessed a massive mayhem in the backdrop of protests by students against the quotas in government jobs over the last few weeks, which dealt a blow to people's normal life and businesses.

"After the fall of the Awami League government, the interim government had just taken over power and it would take time to normalise the business activities," it added.

The MCCI said issues such as smooth logistics, banking services and security in industries needed to be addressed to ensure revival of economic activities.

It stressed the need for overcoming rising inflation, slowdown in external demand, weak remittance inflow, shortfall in revenue collection and slow public expenditure, depreciation of the taka and a decline in foreign exchange reserves.

"Unemployment situation and low investment are other challenges."

The authorities also need to ensure proper electricity and gas supply for economic activities and protect small businesses, it added.

The oldest chamber said agricultural production was good because of a favourable natural factors and strong government support in terms of timely availability of inputs and finance notwithstanding.

The manufacturing sector also registered a slow start of a rebound.

The gradual easing of import restrictions, clearance of a backlog of letters of credit, and the introduction of crawling peg system are considered spurs behind the pickup in economic activity, said the MCCI.

However, the real estate business still stays sluggish mainly for higher costs of property and lower purchasing power of people.

The MCCI said Bangladesh has yet to see tangible economic pickup.

"Besides, the higher prices of building materials have slowed overall construction work," it said citing industry people.

"The devaluation of the taka against the US greenback is one of the major reasons for the increase in construction costs. Amid inflationary pressures, labour and transportation costs have also risen."

The leading chamber cited that the gross inflows of foreign direct investment (FDI) decreased by 6.5 percent year-on-year to $3,813 million in the July-May period of 2024-25 fiscal year and the FDI inflow to Bangladesh was low compared to many other countries, which achieved 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 because of the country's underdeveloped infrastructure," it added.

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

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