Bangladesh set to gain from global economic recovery

Bangladesh has emerged from successive economic shocks with remarkable resilience and is now well placed to benefit from a gradual recovery in global demand, according to HSBC Chief Asia Economist Frederic Neumann.

“Relative to where we were three months ago, we’re now much more comfortable, so much so that we’re actually going to see a mild consumer spending recovery in the rest of the world,” Neumann said in an interview with The Daily Star.

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“That should help Bangladeshi exporters see a gradual increase in growth.”

His optimism follows a turbulent period marked by geopolitical conflicts, elevated energy prices and slowing global demand, which weighed on Bangladesh’s export-oriented economy.

At a recent economic outlook event, the Hongkong and Shanghai Banking Corporation (HSBC) Limited forecast Bangladesh’s economy to grow by around 4.4 percent in fiscal year 2026-27, supported by easing global headwinds and domestic economic reforms.

Neumann said the sharp decline in energy prices has significantly improved the global outlook.

“The good news is that we’ve seen energy prices decline quite rapidly,” he said. “Consumers in Europe and the US will have a bit more money to spend, and that’s good news for Bangladeshi exporters.”

“Last year was a bit choppy in terms of garment exports,” he said. “Now we have more predictability, particularly in the US, and together with lower energy prices that should help stabilise shipments during the second half of the year.”

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FOOD INFLATION EMERGES AS NEXT RISK

While declining oil prices should gradually ease inflationary pressures across Asia, Neumann warned that food inflation could emerge as the next major challenge.

Three months ago, many economists feared disruptions around the Strait of Hormuz could trigger severe fuel shortages across Asia, but Bangladesh weathered the situation better than anticipated.

“I’m surprised how little disruption there was at the end of the day,” he said.

“We’re no longer really worried about energy,” he said. “We’re now worried a little bit more about food.”

The El Niño weather pattern could push food prices higher in major agricultural producers such as India, Indonesia and the Philippines, with potential spillover effects on Bangladesh, although he believes the risks will remain manageable if domestic agricultural production stays stable.

CHINA REMAINS VITAL INVESTMENT PARTNER

Asked about Bangladesh’s growing engagement with China, Neumann said stronger economic ties send a positive message to international investors after a prolonged period of political uncertainty.

“It’s time to project to the outside world that we’re open for business,” he said.

Although China’s domestic economy is facing headwinds, he does not believe they will significantly reduce Beijing’s ability to invest in Bangladesh.

“For China it’s a small amount; for Bangladesh it’s a large amount,” he said, referring to potential investments.

“If you think about energy, Bangladesh has huge potential for solar, and China has the engineering capability and technology.”

However, he said Bangladesh should avoid relying on any single partner and instead leverage its strategic location between South Asia and Southeast Asia.

“The Chinese are key,” he said. “But ultimately we want to be as broad as possible in reaching out to partners.”

“I see it as Bangladesh signalling to the world that it’s back in business after two years of uncertainty,” he said.

INFRASTRUCTURE AND GOVERNANCE DRIVE FUTURE GROWTH

Neumann said Bangladesh has consistently demonstrated its ability to recover from repeated global shocks.

“I am, as an economist, so impressed by the resilience of the Bangladeshi economy,” he said. “Through Covid, the energy crisis and political changes, this economy has actually continued to deliver growth.”

That resilience, however, should not breed complacency.

Asked what Bangladesh must do to strengthen its position in the global economy, Neumann replied: “Infrastructure, infrastructure, infrastructure. It’s actually three things.”

He argued that sustained investment in transport, ports, power generation and urban infrastructure would determine whether Bangladesh can move to the next stage of development.

“We need investment,” he said. “That requires foreign partners, long-term planning and pushing projects through.”

He also called for stronger fiscal reforms to broaden government revenue and create a virtuous cycle of higher investment and faster economic growth.

“We improve revenues, have more money to spend, put it back into the economy for it to grow faster, then have more revenues,” he said. “That’s what we need.”

WHY BANGLADESH LAGS REGIONAL PEERS

Although Bangladesh is often compared with Malaysia, Singapore and Sri Lanka, Neumann said such comparisons overlook important historical and structural differences.

Malaysia had developed much of its infrastructure decades before Bangladesh began its rapid industrialisation, while Singapore’s much smaller population made economic transformation easier.

“This is 170 million people,” he said. “It’s a different animal.”

Bangladesh has also been more exposed to natural disasters and has fewer natural resources than many regional peers.

“Could Bangladesh be, at some point, Singapore? Absolutely. There’s no reason why not. It requires a singular focus on development, with the population and government working hand in hand.”

AI OFFERS MORE OPPORTUNITIES THAN RISKS

Neumann believes Bangladesh could become one of the beneficiaries of artificial intelligence, despite uncertainty over how the technology will evolve.

“We know it’s very promising,” he said. “But we don’t know exactly how it’s going to play out.”

Developing economies often adopt new technologies more quickly than advanced economies because they are less constrained by legacy systems and regulations, he said.

“Sometimes we see countries like Bangladesh being faster in embracing a new technology than some more advanced economies.”

Bangladesh’s young population is another important advantage, while AI is likely to create entirely new markets alongside the replacement of some traditional IT services.

“You can provide a service today that you couldn’t do before because you now can use AI,” he said.

To maximise those opportunities, Bangladesh must invest in digital infrastructure and reduce bureaucratic barriers, he added.

REFORMS MATTER MORE THAN LDC GRADUATION

With Bangladesh approaching graduation from the UN’s Least Developed Country category, Neumann said extending existing trade preferences would be beneficial, but argued that long-term success depends far more on domestic reforms.

“The reforms are necessary regardless of the LDC status,” he said.

“Bangladesh will grow by essentially doing its homework,” he said. “Its economic destiny is not being shaped by whether we get a continuation of the status quo.”

Despite intensifying competition from countries such as India and Vietnam, Neumann described Bangladesh as an attractive investment destination because of its resilient economy and strategic location.

Turning to HSBC’s plans, he reaffirmed the bank’s long-term commitment to the country.

“We’ve got our flag in Bangladesh, and we’re staying,” he said.

“We’re here to help Bangladesh succeed.”