Large-scale manufacturing in Bangladesh contracted by 9.75 per cent year on year in June, according to the latest data available with the Bangladesh Bureau of Statistics.
This decline marks the first negative growth in months following a positive growth rate of 9.56 per cent in May 2024.
This is significant enough to have implications on GDP (gross domestic product).
The quantum index for large-scale manufacturing (LSM) was 209.69 points in June compared to 194.52 points in the corresponding month last year.
Fourteen out of 24 sectors reported negative growth in June 2024.
Contracted sectors included beverage, textile, ready-made garment (RMG), paper and printing, chemical, tobacco, leather and related goods, rubber, non-metallic mineral products, fabricated metal products (excluding machinery and equipment), electronic and optical products, electrical equipment, motor vehicles and furniture.
Specifically, the beverage sector contracted by 28 per cent, textiles by over 23 per cent, clothing by 8.55 per cent, leather by 5.83 per cent, paper and printing by 12.63 per cent, rubber by 28.27 per cent, non-metallic mineral products by 18.57 per cent and motor vehicles by 15 per cent.
In contrast, sectors like coke and petroleum grew by 31 per cent, pharmaceuticals by 5.7 per cent, basic metals by 3.32 per cent and computers by 15.74 per cent.
Economists attribute this decline in large-scale manufacturing to lower productivity due to import restrictions aimed at addressing falling foreign exchange reserves.
Many manufacturers have also been reluctant to expand their operations amid rising inflation.
"I'm sure that the import compression implemented earlier has negatively impacted the large industry in addition to persistently high inflation," said Dr M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.
During periods of inflation, he said, the demand for goods typically does not increase, noting that manufacturers are hesitant to expand their activities.
The manufacturing sector heavily relies on imported raw materials and capital machinery, making it vulnerable to import restrictions.
Former governor Abdur Rouf Talukder, who resigned shortly after the Awami League government fell on August 05, raised the LC market by 100 per cent as part of import restrictions soon after taking office in June 2022.
Syed Nazrul Islam, former first vice-president of the BGMEA and managing director of Well Designers, said overall orders from foreign garment buyers remained poor due to prolonged inflation in Western economies, which impacted Bangladesh's main export-earning industry.
Anwar-Ul Alam Chowdhury Pervez, a former president of the BGMEA, noted that average buy orders were 30 per cent lower than expected.
Aameir Alihussain, managing director of BSRM, the country's largest rod producer, indicates that the economy has faced challenges since early 2024, leading to a contraction in productivity.
Inflation has adversely affected the demand for construction materials, according to him.
The BBS compiles data from a sample of 23 large manufacturing units.
[email protected]
