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Bangladesh’s private sector, the long-standing engine of growth, is facing an unusual slowdown. Political turbulence, delayed financial reforms, and rising global tensions have shaken business confidence. With credit growth falling and investment hitting a decade-low, entrepreneurs are shifting from expansion to survival, raising serious concerns about the country’s near-term economic momentum.
For decades, Bangladesh’s private sector has been the main engine of economic growth. From industry and trade to employment and exports, a significant portion of the country’s economic activity has been driven by private entrepreneurs. However, recent political instability, economic uncertainty, and rising global tensions have placed the private sector under severe strain.
The challenges became particularly visible during the tenure of the interim government led by Professor Muhammad Yunus. Political volatility during that period created a fragile business environment, leaving many entrepreneurs struggling to sustain their operations.
During the interim administration, prolonged political unrest created deep uncertainty across the country. Incidents of violence, mob attacks, and political confrontations disrupted normal economic activities. In many areas, factories and business establishments were targeted, forcing numerous enterprises, both small and large, to suspend operations.
Such disruptions inevitably affected the country’s industrial and production sectors. Manufacturing slowed down, supply chains were interrupted, and thousands of workers lost their jobs. As confidence in the market declined, many business owners shifted their focus from expansion to mere survival.
The interim government and the central bank initiated several reform measures in the financial sector. While these reforms were necessary, the prolonged and uncertain implementation process slowed economic momentum.
Business leaders have expressed concern that delayed decision-making in the name of reform created additional obstacles for commercial activities. The banking sector also experienced uncertainty, leading to a noticeable decline in credit flow to the private sector.
Foreign investors adopted a wait-and-see approach, and major domestic or foreign investment projects remained largely stalled. As a result, frustration and hesitation grew among entrepreneurs, with many choosing to postpone investment plans.
The business community had hoped that the formation of a new elected government would restore stability and revive economic activity. Initially, that expectation generated a sense of cautious optimism among private investors.
However, global geopolitical developments soon introduced fresh uncertainty. Rising tensions in the Middle East involving Iran, Israel, and the United States have placed additional pressure on the global economy. As the conflict escalates, volatility in energy and transportation markets has intensified.
One of the clearest indicators of declining business confidence is the sharp slowdown in private sector credit growth. In Bangladesh, credit growth in the private sector currently hovers around 6 per cent. In January, it stood at just 6.03 per cent – the lowest level in five years.
For eight consecutive months, credit growth has remained below 7%. This trend signals that businesses are reluctant to take new loans for investment. Economic uncertainty, political risks, and global market instability are pushing entrepreneurs toward a cautious stance.
The Middle East conflict has significantly disrupted global energy markets. At one point, the price of crude oil surged to nearly $120 per barrel, while Brent crude prices rose by more than 42% after the escalation of the conflict.
For an import-dependent economy like Bangladesh, this is a major concern. The country imports around 95% of its petroleum and about 30% of its natural gas. Rising oil prices directly increase import costs and place additional pressure on foreign exchange reserves.
The geopolitical tensions have also driven up global shipping costs. At the same time, the depreciation of the Bangladeshi taka against the US dollar has increased the cost of imports even further.
These combined pressures are raising production costs for businesses and making long-term planning increasingly difficult. Many entrepreneurs are therefore prioritising the survival of existing businesses rather than launching new ventures.
Private investment has also weakened significantly. In the 2024-25 fiscal year, private investment dropped to 22.03 per cent of GDP, the lowest level in more than a decade.
A decline in investment inevitably slows economic momentum. Fewer new industries are established, job creation weakens, and economic recovery becomes more prolonged. As a result, achieving growth targets becomes increasingly challenging.
Bangladesh’s private sector now faces a complex set of challenges. Restoring political stability, rebuilding confidence in the banking system, and creating a more investment-friendly environment are urgent priorities.
At the same time, policymakers must navigate global market volatility and rising energy costs to maintain macroeconomic stability. Without swift and effective measures to restore confidence, the slowdown in private investment and credit demand could persist.
Ultimately, rebuilding trust in the economic environment, both domestically and internationally, will be key to reviving Bangladesh’s private sector and sustaining long-term growth.
The new government led by Tarique Rahman needs to bring back the confidence of the private sector at the earliest. Reviving Bangladesh’s private sector now depends on restoring political stability, rebuilding financial confidence, and managing global economic shocks. Without swift policy action, weak investment and slowing credit growth could hinder long-term economic progress.
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The writer is a journalist and columnist
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