GDP growth stutters to 1.81% in Jul-Sept amid uprising, violence

The growth rate dropped sharply from 6.04 percent in the previous year amid political turmoil and clashes

The impact on production due to the unrest, violence, and clashes surrounding the quota movement, and the mass uprising and the deterioration of law and order following the government changeover in July and August has led to a stumble in Bangladesh’s growth rate.

In the first quarter of the ongoing 2024-25 fiscal year, Bangladesh's gross domestic product (GDP) growth stood at 1.81 percent from July to September, compared to 6.04 percent in the 2023-24 fiscal year.

In that same period in 2023-24 fiscal year, GDP growth was 6.04 percent.

According to the updated data sent by the Bangladesh Bureau of Statistics (BBS) on Monday, industrial production increased by 2.13 percent over the three-month period, down from 8.22 percent in the previous fiscal year.

Data shows that GDP growth in agricultural production and the service sector also faltered during this period. However, this is only a provisional estimate. The final estimate may be subject to some changes.

In the agricultural sector, growth during the period under review decreased by 0.19 percent year-on-year to 0.16 percent.

Service sector growth was 5.07 percent in the same period in the 2023-24 fiscal year and fell to 1.54 percent.

The World Bank and the Asian Development Bank, or ADB, had previously predicted that the economic situation would be difficult in the current 2024-25 fiscal year amid the instability in the industrial sector and stagnation in production due to the changeover in power.

The World Bank had predicted that Bangladesh's economic growth would fall to an intermediate 4 percent in the current fiscal year, citing the “significant uncertainty”. Earlier, the organisation had predicted that growth could reach 5.70 percent.

On the other hand, the Manila-based ADB also lowered the growth forecast in its 'Asian Development Outlook, September 2024'.

In its April edition, the ADB had said that Bangladesh's growth could increase to 6.6 percent by the end of the current fiscal year. It was later brought down to 5.1 percent.

If the shock in the first quarter is not dealt with, Bangladesh may be unable to achieve this lower forecast too.

The Awami League government targeted growth of 6.75 percent in the budget presented for the 2024-25 fiscal year. However, the situation changed when a movement that started over quotas in government jobs ultimately led to a mass uprising that toppled the Awami League.

Production and trade were disrupted for more than a month before the fall of the Awami League government on Aug 5 due to the unrest. After the interim government led by Muhammad Yunus came to power on Sept 8, concerns about law and order and the business environment did not subside.

Unrest has spread through the garment industry, the country's main export earner, as the police force – with its connections to the ousted regime – became apparently ineffective.

The government announced 10 days ago that 15 to 20 percent of work orders would be cancelled amid disruptions in production at one factory after another.

Around the same time, media reports stated about a decrease in LCs for the import of capital equipment and raw materials. There is also dissatisfaction among workers in other industries, including pharmaceuticals.

Factories for Gazi Tires and Gazi Tank, some of the most influential companies in the tire and water tank market, were looted and set on fire.

The country's investment situation was not very encouraging either. Customers were also unable to withdraw their salary payments from more than 10 banks.

The work on development projects has been disrupted, leading to the lowest implementation of the Annual Development Programme. A negative trend also emerged in revenue collection.

The news of the stuttering growth rate comes amid the instability in all these economic indicators.