Bangladesh faces structural economic challenges undermining its growth model: Report

New Delhi: Bangladesh's economy is at a critical juncture, with structural weaknesses including rising inequality, a fragile banking sector, high inflation, narrow tax base and an overreliance on garment exports threatening the sustainability of its long-term growth model, a new report has said.

The report from India Narrative said Bangladesh's development strategy delivered strong headline growth over the past decade but successive governments failed to adequately address issues such as income inequality and industrial concentration. Country's economic transformation can only come about through improvements in productivity, diversification of manufacturing, stronger institutions and more equitable distribution of growth.

"The immediate goal should be to rebuild trust in banking, control inflation, increase energy supplies, and stimulate private investment," the report said, as the World Bank projected real GDP growth of 3.4 per cent in fiscal 2026, indicating a significant slowdown from its historically strong growth trajectory.

Inflation remained elevated at 8.3 per cent in September 2026, and since 2022-23, inflation has remained above 9 per cent, reaching 10 per cent in 2024-25. Foreign exchange reserves stood at $31.2 billion, equivalent to about 4.8 months of imports.

"Between 2010 and 2022, the country’s rapid economic growth, driven by export-oriented industrialisation, lifted 34 million people out of poverty, but the benefits of such growth have remained highly uneven," the report noted.

The publication noted a huge concentration of income with the richest 5 per cent of households earning 30.04 per cent of national income in 2022, the 10 per cent accounted for 40.92 per cent of household income whereas the poorest 5 per cent received a mere 0.37 per cent.

The 'Labour Force Survey 2024' of the government found that the unemployment rate climbed to 3.66 per cent in 2024, up from 3.53 per cent in 2022. At 4.4 per cent, the urban unemployment rate was also much higher than the rural unemployment rate of 3.4 per cent.

The 2023 survey had estimated that 1.94 million people aged 15–29 were unemployed, with 79 per cent of all the unemployed belonging to this age group. Nearly 31.5 per cent of unemployed young people with the requisite labour-market availability had completed tertiary education.

The report urged Bangladesh to shift from over dependence on low-cost garment exports, remittance inflows and politically controlled finance to a more diverse, productive and institutionally sustainable development model.

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