SOHEL PARVEZ

Bangladesh’s industrial sector grew by just 2.86 percent in fiscal year 2025-26, marking its slowest expansion in a decade.

The weak performance came despite the economy growing at a faster pace this year. Gross domestic product (GDP) expanded by 4.14 percent, up from 3.49 percent in 2024-25, according to provisional data of the Bangladesh Bureau of Statistics (BBS).

Businesses and economists attributed the industrial slowdown to slowing exports, subdued domestic demand, stubbornly high inflation, energy shortages and financing constraints. Industry accounts for about 37 percent of Bangladesh’s gross domestic product (GDP).

“Many factories and production have been suffering from an energy shortage. We are not getting enough gas,” said Mir Nasir Hossain, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).

Many industries are operating at only 30-40 percent of capacity, he said, with ceramics and glass manufacturers particularly affected by acute gas shortages. “As interest rates on loans are too high, debt servicing is a major concern for entrepreneurs,” said Hossain, also managing director of The Mir Group Ltd.

Access to finance has become another major challenge as the banking sector continues to struggle with rising non-performing loans (NPLs) and lending irregularities.

“Those businesses that wanted to do business genuinely did not get loans in many instances. The problem began from then,” said Shams Mahmud, managing director of Shasha Denims.

“Business confidence fell to its lowest during the tenure of the interim government. Energy security was not ensured. The financial sector has been under stress, while weak logistics and customs-related complications have persisted. All these factors have hampered industrial production,” he said.

The Finance Division, in its Medium-Term Macroeconomic Policy Statement, said industrial activity remained subdued, with several quarters recording growth of less than 1 percent because of energy supply constraints, tight financial conditions and weakness in the ready-made garment (RMG) sector.

“In contrast, the services sector has remained comparatively resilient and continues to provide the principal support to aggregate output,” said the Finance Division. Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), said the slowdown reflected weakness in both external and domestic demand.

“Manufacturing is the dominant component of industry, and the export-oriented garment sector alone accounts for roughly one-third of manufacturing production. With garment exports losing momentum, the principal engine of manufacturing growth has become subdued,” he said.

He said inflation, which has remained close to 10 percent for much of the past four years, has eroded purchasing power and weakened demand for locally manufactured products.

“These industries expanded strongly over the previous decade, supported by rising incomes and a growing domestic consumer market. Persistent inflation may have disrupted that process.”