Political unrest, global trade risks to weigh on economy: BMI

Prolonged political unrest poses a major drag on Bangladesh’s economic growth amid global trade uncertainty, said BMI, a provider of insights, data, and analytics owned by Fitch Solutions.

“The external environment is bleak. Apart from US trade antagonism, Europe-based businesses and diplomats have urged Bangladesh to increase imports from the EU in order to help narrow the bloc’s large trade deficit with the country,” BMI said in its report on Bangladesh’s economy released last week.

BMI forecast that Bangladesh’s economic growth will rise to 5 percent in the fiscal year 2025-26, up from 3.7 percent last year, but warned of downside risks. Earlier, it had projected 5.5 percent growth for the country.

Last month, the Asian Development Bank cut its growth forecast for Bangladesh to 4.7 percent for the current fiscal year from 5 percent in September, citing sluggish investment ahead of elections and slower growth in export earnings.

BMI said its estimate is below the government’s 5.5 percent growth target but still faster than last year. “Private consumption will likely be more resilient in the next few months,” the report said.

The research firm noted that while inflation appears to be sticky to the downside, real wages contracted more slowly, averaging a 0.7 percent year-on-year drop from January to November 2025, compared with a 2.4 percent contraction in 2024.

“The risk here is that unemployment rises aggressively in the coming months, as US tariffs continue to negatively impact the garment industry,” BMI said. It added that any further rise in spending will be limited by the elevated risk of unrest ahead of elections.

“That will also weigh on private investment. Historically, economic growth in Bangladesh has slowed during periods of political unrest. However, as we do not expect the current situation to match the severity of the July Revolution, we still forecast a modest acceleration in growth,” the report said.

The report also highlighted risks in the credit sector, citing a significant rise in non-performing loans (NPLs). “The high NPLs reflect years of weak credit risk assessment and lending practices,” it said.

“The situation is further aggravated by slow and ineffective loan recovery through the judicial system and highlights the growing difficulties that businesses face in servicing their debt. Elevated NPL ratios may also discourage banks from extending new credit, which would further constrain investment and weigh on economic growth,” BMI added.