TL;DR
- Bangladesh’s PMI rose to 55.7 in October, signaling economic expansion after three months of contraction.
- Manufacturing, agriculture, construction, and services sectors all showed positive trends, though employment remains in contraction.
- Domestic challenges such as protests, law enforcement issues, and stagnant public administration could hinder further growth.
- Rising input costs and slower future business expectations reflect cautious optimism amid ongoing challenges.
Bangladesh’s economy exhibited notable signs of recovery in October 2024, with the country’s Purchasing Managers’ Index (PMI) climbing to 55.7, a 6-point increase from the previous month, according to the Metropolitan Chamber of Commerce and Industry (MCCI). This marks a return to expansion after three consecutive months of contraction, signaling a positive shift across key sectors such as agriculture, construction, manufacturing, and services.
The PMI is a widely used economic indicator that reflects the health of a country’s economy. A reading above 50 indicates expansion, while a reading below 50 signals contraction. The jump to 55.7 in October suggests that Bangladesh’s economic outlook is strengthening, with all major sectors showing positive trends.
The manufacturing sector, which plays a crucial role in Bangladesh’s economy, demonstrated accelerated growth across several key metrics. New orders, factory output, and input purchases all saw significant increases. However, challenges remain as employment in the sector continued to contract alongside delays in supplier deliveries and growing order backlogs.
Agriculture also showed encouraging signs of recovery, with business activity and new orders expanding for the first time after months of downturns. Yet, like manufacturing, employment in this sector remained in contraction.
The construction sector returned to growth as well, although this was marginal. The sector still faces slower contraction rates in employment and order backlogs. Similarly, the services sector moved into an expansion phase driven by a rebound in business activity and order backlogs, though employment contraction persisted here too.
Despite these gains across key sectors, Bangladesh continues to face significant domestic challenges that could temper near-term economic growth. Frequent public protests, sluggish improvements in law and order, and stagnation within public administration are ongoing issues that may hinder further progress.
Moreover, rising input costs across all sectors reflect increasing expenses, which could pose additional challenges for sustained economic growth. The MCCI report also noted that while there is cautious optimism for future business expectations, all sectors reported slower expansion rates moving forward.
This economic recovery comes at a time when Bangladesh is grappling with broader macroeconomic hurdles. The United Nations recently projected that Bangladesh’s real GDP growth would slow to 5.6% for the fiscal year 2023-24, down from an estimated 6% in the previous year. Inflation remains a pressing concern as well, though it is expected to ease slightly to 6.8% in 2024 from an estimated 9.6% in 2023.
While Bangladesh has made significant strides over the past few decades—transforming from one of the poorest countries at independence to a lower-middle-income nation—current challenges such as inflationary pressures, balance of payment deficits, and energy crises continue to weigh on its economy.
Looking ahead, Bangladesh’s ability to navigate these domestic challenges while capitalizing on its sectoral expansions will be critical for sustaining economic growth. As the country prepares for its transition from least developed country (LDC) status by 2026 and aims for middle-income status by 2031, targeted policy actions will be essential to maintaining momentum and addressing vulnerabilities within its economy.
While October’s PMI report offers encouraging signs of recovery across multiple sectors in Bangladesh’s economy, ongoing domestic challenges will likely shape the trajectory of future growth.
