Bangladesh’s economy is facing a challenging period as investment activity continues to dwindle.
A recent report from the Bangladesh Bank reveals a significant decline in imports of capital machinery, a key indicator of industrial investment, for the second consecutive fiscal year.
This downturn has serious implications for job creation and the overall health of the economy.
The data from Bangladesh Bank shows that imports of capital machinery fell by 24 percent year-on-year to $2.66 billion in FY24. This follows a 34 percent drop in the previous fiscal year.
The decline is primarily attributed to persistent US dollar shortages and increased import costs due to the devaluation of the local currency.
Economists warn that this trend is a concerning sign of a slowdown in industrial investment.
Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), emphasizes that the decline in capital machinery imports will negatively impact employment generation.
Investors are hesitant to finance new industries or expand existing manufacturing units due to the unfavorable economic conditions.
So the contribution of the industrial sector to the country’s gross domestic products (GDP) will decline for a long period.
In addition to capital machinery, imports of industrial raw materials also experienced a decline of 16 percent year-on-year to $21.75 billion in FY24.
This is largely due to falling exports and slowing domestic demand amidst rising inflation.
The global economic slowdown and domestic challenges have combined to create a challenging environment for businesses.
The decline in investment activity, as evidenced by the reduced imports of capital machinery and industrial raw materials, poses significant risks to Bangladesh’s economic growth and job creation.
The government will need to address the underlying issues, such as foreign exchange shortages and rising import costs, to encourage investors and stimulate economic activity.
