Consumption-led economic dynamism in sight

Rising consumption of goods spurs economic activity and demand-driven imports particularly amid some spending splurge on upcoming national elections, in a rebound from persisting slumps.

Consumption contracted in fiscal years 2023 and FY 2024 consecutively amid persistent high inflation, but industry insiders and economists expect this economic parameter to rise this year.

According to a provisional estimate by Bangladesh Bureau of Statistics (BBS), consumption of goods and services grew 3.53 per cent in 2023-24 in an upturn from a rock-bottom 2.52 per cent in the previous fiscal year. However, BBs has not yet released consumption data for 2025.

Except for the pandemic-hit 2019-20, when the consumption-growth rate was 2.9 per cent, it had been above 6.0 per cent since at least 2016-17.

The rise in domestic consumption trend led to an 11-percent growth in VAT collection in the month of October 2025. However, income-tax collection grew by 10 per cent while import duty counted negative by 16 per cent.

Until October of the current fiscal year, VAT collection from domestic sources had grown by nearly 25 per cent against average revenue-mobilisation growth of around 12-to 15 per cent in the last five years.

Field-level officials say VAT collection from tobacco, restaurants, hotels, social media and beverages will rise in the coming months as election candidates as well as their sympathizers are spending money on campaigns.

Md Sabbir Nasir, Managing Director of Shwapno superstore, observes an interesting month-on-month rise in consumption at a rate of about 8.0 to 10 per cent.

Consumer Confidence Index (CCI) in August 2025 marked 48, out of 100, in an upturn from 32 in August 2024, he mentions.

"I hope the confidence would reach 70 to 80 in January-February next," he says, demanding cut in bank interest to single-digit rates and focusing employment growth.

Revenue board's VAT policy wing Second Secretary Bodruzzaman Munshi says consumption of cigarettes, beverages and other goods rise during national elections but this time there is an added spur as election campaigns are more participatory than previous two elections.

"We expect a significant rise in consumptions of goods in the coming three months due to national elections and also for the holy Ramadan," he told the FE writer.

Bangladesh Bank data show import of goods also on an upturn as traders anticipate rises on the demand side.

In September-October period, letter of credit (LC) opening for some commodities, including sugar, dates and edible oils, increased by 11 to 294 per cent compared to the same period last year.

Imported goods generally take up to three months to arrive after LC opening.

Even, small traders also see a boost in orders for banners, t-shirts and caps as different programmes, rallies centering the forthcoming polls are being held almost every day across the country.

Mr Munshi says the 2018 election had almost no effect on consumption increase but the VAT zones are witnessing it now.

As long as people spend money for campaigns, he hopes, VAT collection would grow.

However, still tax leakages remain in the stem for a lack of automation in VAT collection from retail sales.

Dr Abu Eusuf, Professor of Development Studies at the University of Dhaka, says the national elections and Ramadan have led to higher financial transactions.

"The government is expected to see an impressive growth in VAT collection in coming months," predicts Mr Eusuf, also Executive Director of the RAPID.

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