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Financing conditions have further worsened the situation, Razzaque said, noting that heavy government borrowing from banks risks crowding out private-sector credit.

“In an environment of high interest rates and large NPLs, financially viable banks may find lending to the government both safer and more attractive than financing private investment. This is particularly damaging for smaller and medium-sized manufacturers that have limited access to alternative sources of finance.”

CAN INDUSTRIAL GROWTH REBOUND TO 7%, AND BEYOND

Despite the slowdown, the government has projected industrial growth of 7 percent in fiscal year 2026-27, rising to 7.5 percent in FY28 and 8 percent in FY29.

The Finance Division expects deregulation, higher private investment, stronger exports, improved energy supplies and public infrastructure spending to drive the recovery.

Economists, however, said the target would be difficult to achieve unless major constraints are addressed.

Razzaque said current conditions make a rapid acceleration in industrial growth unlikely, especially amid uncertainty in the global trading environment.

“Industry is being squeezed from both sides: unreliable energy raises the cost of producing, while expensive and scarce credit limits the ability to invest.”

Against that backdrop, he said, the projected acceleration in industrial growth over the next three fiscal years “appears highly ambitious”.

“Such an acceleration would require a strong recovery in exports, domestic demand, private investment, energy availability and credit growth. At present, these conditions are not firmly in place.”

In the July-May period, the country’s exports fell 2.55 percent to $43.79 billion, due to a decline in garment shipments, according to the Export Promotion Bureau.

Razzaque said the new budget provides some benefits to the private sector, but these measures are unlikely, by themselves, to revive the industrial growth engine.

Shams Mahmud said deregulation is a positive initiative, but investors are unlikely to benefit immediately. “Nothing has happened in the last three months that all our problems have been resolved. Energy security has not been ensured. The revenue system has not been automated.”

Nasir shared a similar view. “If we get adequate gas supply, quality electricity and interest rate falls, then growth will pick up,” he commented.

Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, said achieving industrial growth of 7-8 percent would require lower inflation, exchange-rate stability, adequate foreign currency for imports, reliable energy supplies, and a significant recovery in private and foreign investment.

“The government must also ensure predictable tax and regulatory policies, improve port and customs efficiency, reform the banking sector, and support export diversification and productivity growth,” said the economist.

Without these improvements and stronger global demand, the projections are more aspirational than achievable, he said.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), shared a similar assessment.