Large manufacturing industries surmount setbacks, show upturn

Bangladesh's large-scale manufacturing sector surmounted setbacks to get on an upturn as owners and economists see further advances ahead now that the dust settles through political transition.

The sector, which accounts for over 11 per cent of the country's GDP, started the fiscal year 2025 on a positive note, recording growth in July 2024, in a modest turnaround from a significant contraction in June, the final month of the past fiscal.

According to data from the Bangladesh Bureau of Statistics (BBS), the large industrial manufacturing quantum index grew 3.44 per cent to 203.34 points in July 2024, compared to 196.56 in July 2023.

However, the large industrial sector faced a 9.75-percent contraction in June 2024, underscoring the challenges of the previous fiscal year.

In July, 17 out of 23 manufacturing subsectors recorded positive growth, while one sector remained unchanged, and five sectors saw negative growth.

Key contributors to the growth included machinery and equipment at 40 per cent, computer, electronics, and optical products at 22 per cent, coke and refined petroleum products at 22 per cent, other non-metallic products 15 per cent, food sector at 14 per cent, leather products at 9.0 per cent, fabricated products at 9.0 per cent, and clothing sector at 3.0 per cent.

On the downside, beverage production contracted more than 22 per cent, rubber and plastic production over 18 per cent, the electrical- equipment sector over 9.0 per cent and furniture more than 8.0 per cent.

Industry experts point out disruptions during the July-August period due to political unrest that led to the downfall of the Awami League government.

Syed Nazrul Islam, a former leader of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and managing director of Well Dress, notes that clothing orders were slower in July.

"Many garment factories suffered damage due to mob violence during this period," he says.

However, he strikes a note of optimism about a rebound.

"We are expecting good orders for the next season."

Economists believe that economic activity is gradually recovering, supported by a stable foreign-exchange market and growing domestic demand.

However, they appear worried that high inflation could hinder the expansion of economic activities by way of curbing demand for goods and services.

Dr Zahid Hussain, a former lead economist of the World Bank, points out that the student-led protests in mid-July posed "temporary setbacks for the economy".

Dr M. Masrur Reaz, chairman and CEO of Policy Exchange, has attributed a surge in large-scale industrial activity to seasonal factors, while emphasizing the recovery in the readymade garment (RMG) sector, which carries the highest weight in the large-industry index.

"The RMG sector, with over 60-percent weight in the index, grew more than 3.0 percent, driving the overall large-industry growth."

He forecasts continued improvement in clothing manufacturing in the coming months.

The beverage industry recorded a slower growth. Dr Masrur notes that the heavy rainfall dampened demand for beverages, impacting the industry's performance.

A significant rainfall in July (523 mm compared to June's average), was recorded during July.

With stability returning to the economy, manufacturers are optimistic about the coming months.

"Economic recovery is on track as manufacturers can now procure raw materials and machinery from abroad without significant challenges," says Dr Zahid Hussain.

While challenges remain, particularly with inflation, the overall outlook for large-scale manufacturing in FY2025 appears positive as the sector builds on its recovery momentum.

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