Fall of industrial output ominous for economy

In the backdrop of an economic landscape riddled with challenges, industrial production in Bangladesh has witnessed a notable deceleration, registering a growth rate of 8.99 per cent in the last fiscal year of 2022-23.

This decline can be attributed to a convergence of factors, including a drop in consumer demand, persistent inflationary pressures, lackluster export performance, and diminishing imports.

The prevailing trend of sluggish industrial production is expected to continue throughout the current financial year of 2023-24.

This is primarily due to the ongoing downturn in the import of crucial industrial raw materials and intermediate goods, exacerbated by political uncertainties.

It is worth acknowledging that the existing growth rate remains satisfactory, given the challenging economic environment characterised by import compression and various headwinds.

It is anticipated that factory output growth may remain subdued in the coming months, with a potential rebound in the early months of the next year.

Notably, the industrial sector plays a pivotal role in Bangladesh’s economic landscape, contributing significantly to the gross domestic production, with a share of 35.55 per cent in FY23.

In particular, the manufacturing sector accounts for 23 per cent of the GDP. One of the critical drivers of the current economic challenges in Bangladesh is the misalignment between wage growth and inflation rates.

For the past 18 months, wage growth has trailed behind the inflation rate, forcing low-income families, including the working population, to curtail their consumption of essential daily necessities as a means of managing living costs.

Furthermore, the economic landscape has been marred by a significant decline in imports. In FY23, imports plummeted by 16 per cent year-on-years, and this trend has persisted into the first two months of FY24, with a staggering 22 per cent drop.

The decline in imports is a result of measures taken by the Bangladesh Bank to discourage the import of non-essential items in a bid to safeguard the country’s foreign currency reserves.

Data from the Bangladesh Bureau of Statistics (BBS) reveals that several key industries, including jute textiles, garments, pharmaceuticals, paper, fertiliser, tea and coffee processing, soap and detergents production, as well as fruit preservation, experienced a decline in production in June of this year compared to the previous year.