Economy gradually recovering despite political instability: MCCI

NN Online:

The Metropolitan Chamber of Commerce and Industry (MCCI) has reported that Bangladesh’s economy is gradually recovering, despite political instability following the July-August movement.

In its quarterly economic review for July-September 2024 (Q1 of FY25), released on Thursday, the MCCI highlighted improvements in exports, imports, remittances, and foreign exchange reserves, despite the numerous economic challenges faced during the period.

It has identified several pressing economic challenges including high inflation, declining external demand, a revenue shortfall, slow public expenditure, reduced job opportunities, and sluggish investment.

The agriculture sector employed about 45 per cent of the labour force and contributed 12.84 per cent to GDP in Q4 of FY24, up from 9.41 per cent in Q3 of FY24. Strong government support and favourable natural conditions, aside from localised flooding, enabled the sector to achieve a growth rate of 5.27 per cent in Q4 of FY24, slightly higher than the 5.16 per cent growth in Q3, said a press release.

It said while data for Q1 of FY25 is pending, the industrial sector experienced slower growth of 3.98 per cent in Q4 of FY24, down from 6.25 per cent in Q3. The sector’s GDP share also fell to 35.38 per cent in Q4 from 40.50 per cent in Q3. The manufacturing sub-sector showed a similar trend, with growth declining to 6.45 per cent in Q4 from 6.93 per cent in Q3.

The services sector grew by 3.67 per cent in Q4 of FY24, slightly down from 3.81 per cent in Q3. However, its GDP contribution increased to 51.78 per cent in Q4, up from 50.09 per cent in Q3, it added.

Data from the Bangladesh Power Development Board (BPDB) indicates that power generation reached a maximum of 15,717 MW on September 20, 2024.

On September 30, actual generation was 13,176 MW against a demand of 13,946 MW, resulting in 340 MW of load shedding.

Broad money (M2) growth slowed to 7.88 per cent in September 2024, below the central bank’s target of 8.20 per cent.

Private sector credit grew by 9.20 per cent year-on-year, falling short of the 9.80 per cent target. Public sector credit growth plummeted to 8.75 per cent, compared to 26.27 per cent in September 2023.

Tax revenue collection decreased by 6.07 per cent year-on-year in Q1 of FY25, with significant shortfalls in VAT and customs revenue.

Public expenditure also slowed, with ministries and divisions spending only 4.75 per cent of the annual development program (ADP) allocation during the quarter, compared to 7.50 per cent in the same period last year, it said.

Export earnings grew by 7.62 per cent year-on-year to $11.66 billion in Q1 of FY25, while imports rose by 1.64 per cent to $16.17 billion. Remittances surged by 33.34 per cent to $6.54 billion, driven by higher inflows in September 2024.

General inflation eased slightly to 9.92 per cent in September 2024 from 10.49 per cent in August. Food inflation dropped to 10.40 per cent, while non-food inflation stood at 9.50 per cent. Rural areas were disproportionately affected by high inflation compared to urban regions.

The Bangladeshi Taka depreciated by 1.67 per cent against the US dollar between June and September 2024. Gross foreign exchange reserves stood at $24.86 billion in September, down from $26.91 billion a year earlier.

Foreign direct investment (FDI) inflows declined by 15.01 per cent year-on-year to $300 million in Q1 of FY25.

While signs of recovery are evident, significant challenges remain for Bangladesh’s economy, said MCCI.

It stressed the need for addressing structural inefficiencies and improving governance will be crucial to sustaining growth in the coming quarters.