Bangladesh Faces Economic, Garment Sector Challenges

Following its recent victory in the national elections, the Bangladesh Nationalist Party (BNP) now confronts significant economic and social challenges. Experts highlight a stagnating economy, high inflation, rising unemployment, and pressures on the export-oriented ready-made garment (RMG) sector as the foremost issues facing the incoming government.

In a webinar hosted by the Asia Society Policy Institute titled “Bangladesh After the Vote: Democracy Reform and Foreign Policy”, speakers emphasised that voter expectations will largely hinge on three pillars: job creation, price stability, and maintaining steady relationships with key international partners. Jafor Sobhan, editor of Counterpoint, noted, “Youth employment was a primary driver of the mass movement that ultimately contributed to the fall of the previous administration. While the new government may enjoy temporary popular support, it will not be sustained without tangible economic results. Strengthening fiscal stability, preserving the currency’s value, and reducing non-performing loans are now of paramount importance.”

Election Outcomes

The parliamentary elections on 12 February saw BNP secure 209 out of 300 seats, while the Jamaat-e-Islami-led coalition obtained 77 seats.

Economic Outlook

According to the International Monetary Fund (IMF), Bangladesh’s GDP growth slowed to 3.7% in FY2025, down from 4.2% in FY2024 and 5.8% in FY2023. Projections suggest growth could rebound to 4.7% over the next fiscal year. Economists attribute the slowdown to global factors including the Russia-Ukraine war and broader economic downturns, contrasting sharply with decades of growth between 6–7%.

Webinar participants expressed confidence that newly appointed Finance Minister Amir Khasru Mahmud Chowdhury and Foreign Minister Khalilur Rahman possess the experience necessary to navigate both economic and diplomatic challenges. Shahid Akhter, former ambassador to Spain, Thailand, and Cambodia, remarked that the cabinet combines experienced and younger officials, selected on merit.

Garment Sector and Investment Risks

Moody’s recently reported that sporadic law and order concerns and labour unrest in the garment sector have affected economic activity, while policy uncertainty has dampened investment. Nevertheless, banking governance, parliamentary progress, and initiatives to make exchange rates more flexible were highlighted as positive steps.

Oxford Economics notes that despite significant risks, BNP is expected to maintain market-oriented economic policies. The impending transition from least-developed country (LDC) status to developing country status in November may reduce trade privileges, potentially impacting RMG exports by up to 14%. Currently, LDC status provides tariff-free access and other advantages, but future competition from countries like Vietnam and India will intensify.

Foreign Policy Prospects

Analysts anticipate that Prime Minister Tarek Rahman will seek improved ties with India, strained since the previous administration’s fall amid incidents of communal violence and Sheikh Hasina’s temporary refuge in India. Dhaka has formally requested Hasina’s extradition following her death sentence in a war crimes tribunal.

Professor Sreeradha Dutta of O.P. Jindal Global University observed, “There are no signs of hostility between the two nations, and mutual cooperation could strengthen regional stability. There is ample scope for collaboration on shared interests.”

In conclusion, experts assert that the new government’s success will depend on four critical areas: economic reform, investment climate enhancement, job creation, and balanced diplomacy with neighbouring countries. Performance in these domains will shape Bangladesh’s political trajectory in the coming years.