Bangladesh export sector faces global economic headwinds, domestic challenges: Experts

Bangladesh's export sector is navigating a difficult transition as weak global demand coincides with domestic political and economic pressures. However, a sharp rebound in recent months is raising hopes of stabilisation.

Export earnings in the first seven months of the current fiscal year (FY26) fell 1.93% year-on-year to $28.41 billion, according to data from the Export Promotion Bureau (EPB), down from $28.96 billion in the same period a year earlier.

The decline reflects sluggish demand in major Western markets and disruptions linked to political change at home.

Yet December and January figures point to a potential turning point.

Exports in January 2026 reached $4.41 billion, only 0.5% lower than a year earlier, but up 11.22% from December's $3.96 billion, signalling renewed momentum.

"Exports in the last two months show a shining future as global trade conditions are gradually improving," said Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office.

He noted that exporters continue to face domestic challenges, including uninterrupted energy supply and labour unrest, which remain critical constraints for the manufacturing sector.

At the same time, global trade remains unsettled by geopolitical tensions and trade policy uncertainty, including the impact of US President Donald Trump's trade war.

Major global suppliers have adopted a wait-and-see approach as consumers in the United States and the European Union struggle with high living costs and job losses.

The ready-made garments (RMG) sector has once again emerged as the backbone of Bangladesh's export performance. RMG earnings rose 11.77% year-on-year to $22.98 billion during July-January, accounting for about 81% of total exports.

Sustained global demand and improved factory efficiency helped the sector offset weakness elsewhere.

Other export segments showed mixed results. Leather and leather goods, jute and home textiles recorded improvements in January, while agro-processed products and frozen fish lagged behind, failing to match the apparel sector's growth.

The United States remained Bangladesh's largest export destination, with earnings of $5.21 billion in the July-January period, up 1.64%. Germany ranked second with $2.85 billion, followed by the United Kingdom at $2.77 billion.

Economists attribute the overall export dip to several factors. Slowing consumption and high inflation in Europe during the latter half of 2025 dampened demand for non-essential goods.

Domestically, a massive student-led movement and a subsequent change in government in mid-2024 disrupted supply chains through factory closures, transport strikes and port congestion, with spillover effects into the current fiscal year.

Energy shortages also weighed heavily on production. Persistent gas and electricity constraints in late 2025 raised costs and hurt competitiveness, particularly for small and medium-sized exporters.

In addition, a strong post-pandemic rebound in FY25 created a high comparison base, making current performance appear weaker.

Analysts say the recent month-on-month rebound could mark a turning point. With the exchange rate stabilised at around Tk 122 per dollar and continued momentum in RMG and leather, export performance for the full fiscal year could end stronger than early data suggested.

Still, longer-term risks remain. "Depending on a single product, it is very difficult to increase exports," said Dr M Masrur Reaz, chairman and founder of Policy Exchange Bangladesh.

He warned that Bangladesh must accelerate product diversification, particularly as apparel exports face tariff challenges in the US market.

Rising living costs in Western economies are reshaping consumer behaviour and limiting purchasing power, he added, reinforcing the need for innovation and a broader export base to ensure sustainable growth.