Economic stability returning, but full recovery will take time: PRI

Bangladesh has made modest progress toward economic stabilisation, but it may take time for all indicators to stabilise, as many challenges remain, according to the private think-tank Policy Research Institute (PRI).

The progress is reflected in a stable exchange rate, a build-up of foreign reserves, and moderate improvements in inflation. However, PRI said fiscal and banking sector reforms have been limited. The adjustment has come with slow economic growth, stagnant investment, rising unemployment, and declining real wages.

"Economic policymaking in 2026 cannot assume that stability will return soon," said Ashikur Rahman, principal economist at PRI, during a keynote presentation at PRI's monthly macroeconomic insights event yesterday, jointly organised with the Australian Department of Foreign Affairs and Trade at the PRI office.

He added that policy must embrace uncertainty and build strategies around it. "Policy frameworks must be flexible. Institutions must be capable of mobilising real-time responses. Decisions must be timely, credible, and anchored in preparedness," Rahman said.

Looking ahead to 2026, he said, "Perpetual instability -- both external and domestic -- is no longer an exception; it has become the new normal. Global geopolitical shocks, wars, trade disruptions, climate volatility, and shifting international economic dynamics will continue to test our resilience.

"At the same time, internal political uncertainty, institutional stress, and governance challenges will keep shaping macroeconomic management."

Rahman also likened the economy to a forest, saying, "In many ways, we must behave like a deer in a forest -- always alert, aware of our environment, attuned to early warning signals, and ready with a crisis-time economic playbook.

"What seems stable today can become chaotic tomorrow. Survival and progress in this new world will depend on vigilance, adaptability, discipline, and readiness to act decisively."

According to PRI, Bangladesh's GDP growth slowed to 3.4 percent in Q4 of FY25, mainly due to weaker performance in industry and services. Private consumption and government spending eased, while investment growth remained low at 1.8 percent due to high borrowing costs and political uncertainty.

Strong remittances and higher foreign reserves support macroeconomic stability and could boost consumption and investment as inflation eases. However, political instability and policy uncertainty ahead of elections remain major downside risks, PRI said.

Sustained recovery will depend on political stability, credible elections, and structural reforms to restore investor confidence and boost productivity, the think-tank added.

The external sector continues to improve. Between July and October FY26, Bangladesh's Balance of Payments showed a $1.1 billion surplus, mainly from a stronger financial account. Remittance inflows rose 20 percent during July-November of FY26.

"There has been some stability in foreign exchange reserves and the exchange rate. However, the country's economic growth and investment have slowed," said Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry.

He added, "High inflation, uncontrolled non-performing loans in the banking sector, and a very low tax-to-GDP ratio remain key challenges for the economy."

Rahman also highlighted the importance of political stability, energy security, and policy certainty in restoring business confidence.

At the seminar, speeches were also delivered by PRI Executive Director Khurshid Alam and Research Director Bazlul Haque Khondker, among others.