Despite stability, BD faces pressure of inflation: GED

Despite a rebound in economic activities and largely restored macroeconomic stability, Bangladesh faces mounting pressures of persistent inflation and fiscal slippages, revealed the latest publication of the General Economics Division (GED).

The August issue of the "Monthly Economic Update and Outlook," released by the GED of the Planning Commission on Sunday, also warned that the persistent challenges, such as youth unemployment, regional disparities, elevated multi-dimensional poverty, and climate vulnerability, would pose risks to long-term stability.

The GED report urged expediting reform initiatives to rebuild trust and confidence, noting that the success of many reforms depend on political will and institutional capacity of the next elected government, although the interim administration has provided a blueprint for the future governments.

The publication identified inflationary pressure as a major concern, and revealed that consumer prices stayed well above the government's target, driven mainly by food inflation amid supply-side disruptions and higher import costs.

Non-food inflation also inched upward due to fuel price adjustments and pass-through effects of exchange rate depreciation, it added.

The GED warned that persistently high inflation is eroding real incomes and dampening consumption, especially among the low- and fixed-income groups.

While the government has expanded subsidised food distribution and cash transfer programmes, these measures are 'inadequate' to fully shield vulnerable households.

The publication suggested a prudent monetary and fiscal coordination to balance inflation control with growth support. Monetary policy tightening by the Bangladesh Bank has slowed credit growth to the private sector, but its impact on inflation has been limited so far.

It also focused on accelerating structural reforms, particularly in revenue mobilisation and investment climate improvements.

The update provided a comprehensive review of the country's current economic status, identifying both strengths and vulnerabilities, while outlining the policy actions needed to stabilise the economy, rebuild trust, and revive economic activities.

The GED noted that overall economic activities remained positive, with agriculture ensuring food security, industry supported by infrastructure investments, and services buoyed by digitalisation and domestic consumption.

"Remittances have continued to provide steady inflows, cushioning external shocks," read the report, underscoring that the status of the economy is mixed.

Stability is undermined by stubbornly high inflation, weak revenue mobilisation, and widening trade gaps. While growth is expected to remain above 6.0 per cent, the near-term outlook is clouded by external uncertainties and domestic structural bottlenecks, it explained.

The report also noted that reviving economic activities would require a careful balance between stabilisation and growth support. Inflation has subdued household demand, while tight credit conditions and fiscal constraints have slowed private investment.

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