Economic growth in Bangladesh slows as inflation inflates household and governmental consumption expenses and deflates the volumes of goods and services consumed, just-past fiscal year's available accounts show such domino effect of price rises.
Provisional estimates prepared by Bangladesh Bureau of Statistics (BBS) show total consumption expenditure increased nearly 12 per cent in FY2025-26 to Tk 48.116 trillion.
The consumption-cost escalation is evident under the expenditure approach to measuring gross domestic product (GDP).
Consumption remains a predominant component of Bangladesh's GDP, accounting for more than 78 per cent of total expenditure, while investment represents most of the remaining share.
Private consumption alone contributes around 73 per cent of GDP, with government consumption accounting for about 6.0 per cent.
Officials at BBS told The Financial Express that consumption expenditure typically rises sharply during periods of elevated inflation because households and the government have to spend more money to purchase the same quantities of goods and services.
On average, inflation in the past 11 months of the immediate-past fiscal year was approximately 9.0 per cent while the GDP deflator-a broader measure of price changes across the economy-increased around 10 per cent.
The simultaneous rise in consumer prices and the GDP deflator substantially inflated nominal consumption expenditure, according to BBS national accounting wing.
"When inflation remains persistently high, the purchasing power of money declines. Consumers, therefore, have to spend significantly more to maintain the same standard of living, even if the actual quantity of goods and services consumed changes little," says a senior BBS official at the wing.
He says higher nominal consumption should not automatically be interpreted as an improvement in household welfare.
A large portion of the increase simply reflects higher prices rather than stronger real demand.
The provisional GDP estimates also show that total investment expenditure expanded by 8.59 per cent during the fiscal year, supported by increases in both private-sector investment and public development spending.
Under the expenditure method of GDP calculation, economic output is measured by combining three key components: household and government consumption expenditure, gross capital formation or investment, and net exports.
Bangladesh has consistently recorded a negative contribution from net exports because imports continue to exceed exports, reducing the overall expenditure-side GDP.
Officials say GDP estimates prepared under both the production approach and the expenditure approach broadly converge, with only limited statistical discrepancies, which are considered normal in national accounting.
The expenditure-side estimates suggest inflation remained the principal driver of nominal GDP growth during FY2025-26.
While households spent considerably more in monetary terms, much of that increase was needed merely to offset rising prices rather than to finance higher real consumption.
Economists say the latest figures highlight the distinction between nominal and real economic growth.
Dr Zahid Hussian, an independent economist, says although current-price GDP expands during periods of high inflation, the real purchasing power of consumers may stagnate or even decline if wage growth fails to keep pace with rising living costs.
"The trend also carries implications for Bangladesh's medium-term growth outlook."
jasimharoon@yahoo.com