FROM PAGE B1

Investment grew by 1.76 percent in FY25, lower than 3.27 percent in FY24, due to higher inflation and rising borrowing costs, along with political developments arising after the July uprising, it added.

The report said private sector credit grew at a historically low rate of 6.5 percent, reflecting subdued business confidence alongside the cumulative impact of the tight monetary stance.

Government consumption expenditure growth also dropped sharply to 3.21 percent from 9.77 percent during the same period, resulting from the interim government’s austerity measures.

The BB quarterly report said the external sector demonstrated notable resilience in the fourth quarter of FY25.

It was supported by strong remittance inflows, a stable market-determined exchange rate, higher inflows of medium- and long-term loans, including assistance from development partners, and steady export growth.

“The overall condition of Bangladesh’s economy is satisfactory. It has overcome significant challenges and achieved macroeconomic stability, with resilient GDP growth,” the report said.

Looking ahead, the expected easing of inflation, strong remittance inflows, and improved foreign exchange reserves are likely to increase private consumption and investment in the coming quarters.

All of these are indicative of a robust economic recovery, the BB said.

“To this end, the industrial and service sectors are expected to gain momentum, supporting Bangladesh’s steady economic expansion.”

On inflation, it said favourable rainfall, easing global commodity prices, exchange rate stability, and a growing foreign exchange reserve are likely to help contain inflation.

Softer global commodity prices should also help contain price pressures, it said.

The 12-month average inflation is projected to decline to 6.5 percent at the end of FY26, it added.

“Bangladesh Bank is expected to gradually reverse its contractionary monetary policy stance once inflation demonstrates a sustained downward trend,” the report said. The central bank may adjust the policy rate if the downward trend in inflation persists.

However, the financial sector continues to face major problems with non-performing loans. This has had an impact on capital adequacy performance and banks’ ability to make investments, said the BB.

On the trade front, it said the final reciprocal US tariff for Bangladesh may open up new opportunities for exports to the US, particularly for readymade garments, as low-end garment items remain competitive.

“The ongoing banking sector reforms, including the upcoming bank mergers and acquisitions, are expected to address the challenges of the industry,” the BB said.

However, it said, “The political events leading up to the next general election continue to be a cause for concern as they pose a risk to the economy’s strong growth trajectory.”

The BB said domestic political developments during the period before the next general election remain a concern for investor confidence and the momentum of FDI inflows.