Budget 2025: Bangladesh sets 6.75% GDP growth target

Growth lagged significantly behind the 7.5% rate the country had targeted in the budget for 2023-24

Finance Minister AH Mahmood Ali has set a lower target for Gross Domestic Product growth than his predecessor did in 2023 as various macroeconomic indicators including inflation and currency depreciation put the Bangladesh economy under pressure.

The minister targeted a modest increase in the growth rate to 6.75 percent in the Tk 7.97 trillion budget presented for the 2024-25 fiscal year in parliament on Thursday.

AHM Mustafa Kamal had set the growth target at 7.5 percent for the 2023-24 fiscal year ahead of the election. It was later brought down to 6.5 percent in the revised budget. However, the government has not been able to reach that target either.

According to estimates from the Bangladesh Bureau of Statistics, the size of the country’s economy is likely to increase by 5.82 percent based on the first seven months of the outgoing fiscal year.

Mahmood Ali, 81, an economics student who entered politics after retiring from his diplomatic career, did not clearly explained the reason for the lower GDP target.

But his stance comes as a shift from the Awami League government’s ambitious growth targets over the past several years.

The minister said, “The average growth rate between FY 2009-10 to 2022-23 was 6.71 percent. To maintain this growth in future, all reasonable support will be continued to encourage agricultural and industrial production.“

Besides, proper implementation of important infrastructural projects and adoption of appropriate action plans aimed at increasing export earnings and remittances will help achieve the desired GDP growth. He said. It is expected that pursuing all the prudent policy measures will help achieve GDP growth of 6.75 percent in the next fiscal year and 7.25 percent in the medium term."

Although many economists consider the growth rate as a measure of economic dynamism, they are reluctant to accept it as an indicator of sustainable development. Still, this aspect of the economy has been repeatedly been a topic of discussion in Bangladesh’s political arena.

In FY19, Bangladesh achieved a record 8.15 percent GDP growth. Then came the pandemic.

The former finance minister set a growth target of 8.2 percent in FY20, but the actual growth achieved was 3.45 percent, the lowest in several decades.

The growth rate increased to 6.94 percent in FY21 after a turnaround from the impact of the pandemic. The GDP growth further increased to 7.1 percent in FY22.

The government had initially set a target of 7.5 percent GDP growth in the budget for FY23. The finance ministry then revised it down to 6.5 per cent. The BBS puts GDP growth in FY23 at 5.78 percent at the end of the fiscal year.

Investment in Bangladesh fell during the COVID-19 pandemic. The Russia-Ukraine war began just as the country seemed to be in recovery after weathering the crisis. The war caused global instability and further affected the economy.

All countries around the world are experiencing the repercussions of the war to varying degrees. Prices of various commodities, including food, have risen in the international market, and the exchange rate of the dollar has also increased. As a result, the production cost of goods has also increased.

Economists predicted that the war was going to have a major impact on Bangladesh's economic growth and social security. That prediction has come true.

The current projections from the BBS put GDP growth in FY24 at 5.82 percent based on the first seven months until January.

The World Bank's projection suggests that Bangladesh's GDP growth in the outgoing fiscal year will be even lower, at 5.6 percent.