Low growth, high inflation may prolong

Economists and experts on Wednesday said Bangladesh risked slipping into a prolonged phase of low growth and high inflation unless deep structural reforms were carried out alongside ensuring political and macroeconomic stability.
Without decisive action on long-pending institutional and structural weaknesses, the country's ambition of sustaining high growth and becoming a trillion-dollar economy could remain out of reach, they added.
They made the remarks at a discussion jointly organised by Voice for Reform and the Bangladesh Research Analysis and Information Network (BRAIN) at the BDBL Bhaban in the capital's Karwan Bazar.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said Bangladesh was currently experiencing a moderate form of stagflation, where economic growth remained below its potential while inflation continued to rise.
In developing economies, stagflation did not necessarily imply negative growth, but rather growth that fell short of targets amid persistent inflation, he said.
Since the Covid-19 period, inflation had increased sharply, while growth had shown a sustained downward trend, he said, adding that the Gross Domestic Product (GDP) growth of around 3.5-4.0 per cent combined with high single-digit inflation reflected clear stagflationary pressure.
Sustained economic growth fundamentally depended on political and macroeconomic stability, Dr Hussain said, identifying inflation control, balance of payments stability, and restoration of the financial sector's health as the three key pillars of macroeconomic stability.
He said Bangladesh's potential growth was capped at around 6.5 per cent under the current institutional framework, while achieving growth close to 8.0 per cent, required to be a trillion-dollar economy by 2035, would not be possible without deep structural reforms.
The noted economist highlighted that implementing deep structural reforms in Bangladesh faced significant difficulties due to entrenched vested interests that benefited from the status quo.
He explained that while policy measures, such as incentives or temporary relief, could act as short-term "painkillers" to ease economic pressures, they did not address the underlying structural problems.
Real solutions, he said, required "surgery" in the form of comprehensive reforms, including overhauling the National Board of Revenue, restructuring the banking sector, and addressing mismanagement at key institutions like the Chattogram port.
Among others, Dr Monzur Hossain, member of the General Economics Division under the Planning Commission; Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD); and Dr Rashed Al Mahmud Titumir, professor of development studies at the University of Dhaka; spoke at the event moderated by AKM Fahim Mashroor, convener of Voice for Reform.
Dr Monzur said sustaining 8.0 per cent growth until 2035 was an ambitious goal that could not be achieved without rebuilding the economic foundation and focusing on inclusive and sustainable development instead of cosmetic modernisation.
Investment remained the weakest component of the economy, with private sector credit growth at historically low levels, he said, adding that high interest rates alone were not responsible.
Earlier periods of higher credit growth often resulted in non-performing loans and capital flight rather than productive investment, while most current investment was limited to ongoing projects, reflecting weak investor confidence, he said.
The labour market in Bangladesh faced a deep skills mismatch, with unemployment being the highest among the educated, while employers reported shortages of skilled workers, said Dr Fahmida.
She said the private sector, accounting for around 80 per cent of the economy, had not expanded sufficiently, increasing the pressure on government employment.
Structural weaknesses in banking, energy, taxation, and labour markets continued to constrain growth, she added.
She also pointed out that although reform initiatives existed, implementation remained weak due to entrenched vested interests.
Besides, she stressed a strong commitment from the highest levels of the government to break rent-seeking structures and implement long-pending reforms.
Dr Rashed said Bangladesh was facing a deep political-economy crisis rooted in institutional capture, where power, capital, and the state had become mutually reinforcing in a predatory system.
This was not a temporary shock, but the result of prolonged centralisation, weakened accountability, and systematic resource extraction, he said, adding that without institutional reforms, replacing individuals or changing governments would not deliver meaningful change.
He urged political parties to present credible economic manifestos to explain how growth, jobs, and public services would be financed.
Presenting the keynote, economist Jyoti Rahman warned that Bangladesh risked falling into a low-equilibrium trap unless investment, productivity, and employment growth were urgently revived.
Reaching a trillion-dollar economy in the current prices would require sustaining around an 8.0 per cent real GDP growth for a decade, he said, identifying stalled private investment as the key constraint.
Bangladesh would need around $10 billion a year in quality private investment to revive growth, and political stability alone would not be sufficient, he added.

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