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Bangladesh’s economy is navigating a complex landscape of challenges and opportunities. The country’s real GDP growth sharply declined to 5.8% in FY23 from 7.1% in FY22, primarily due to a slowdown in private consumption and investment. While the economy was on a recovery path following the COVID-19 pandemic, the Russia-Ukraine war triggered significant global disruptions, affecting Bangladesh’s economic stability as well.
Bangladesh’s economy has been struggling with the lingering effects of past economic mismanagement, including financial irregularities, and manipulated economic indicators, which contributed to significant capital outflows and long-term instability. The depreciation of the Bangladeshi Taka (BDT) has been driven by rising import costs, declining remittances, and large foreign payment obligations, such as the Asian Clearing Union (ACU) settlement. Additionally, global inflation, fueled by the Russia-Ukraine war and rising fuel prices, has intensified economic pressures. As a result, BDT has depreciated by 39.53% between January 2022 and January 2025, exacerbating inflationary pressures and straining the overall economy.
Adding to the strain, fiscal challenges have intensified. The fiscal deficit rose sharply to 0.7% of GDP (Tk 387.72 billion) in July-November 2024, compared to just 0.03% in 2023. This alarming rise has been driven by the government’s spending on subsidies (Tk 279.79 billion, up 89%) and food stockpiling (Tk 43.23 billion, up 87%), reflecting its attempt to cushion the economy from inflationary shocks. However, with total revenue collection growing by just 1.7%, and tax revenue declining by 3%, the widening deficit raises concerns about debt sustainability and future fiscal flexibility.
Despite these challenges, Bangladesh has long been recognized for the resilience of its people, and recent economic indicators reflect this strength. The country’s current-account deficit narrowed sharply from $3.16 billion in 2023 to $752 million between July and October 2024, driven by 8.3% export growth ($14.29 billion) and a 30% surge in remittances ($8.96 billion).
However, the minimal 1% increase in imports—a result of stricter monitoring and restrictions—also contributed to the narrowing deficit. Given that Bangladesh’s export-driven economy relies heavily on imported raw materials for manufacturing, this limited import growth could signal potential constraints on future production and trade competitiveness.
While Bangladesh faces macroeconomic challenges, strategic trade and investment policies can help mitigate these pressures and drive sustainable growth. Countries like Vietnam and India have successfully leveraged trade liberalization and foreign investment to strengthen their economies. Vietnam’s proactive approach—capitalizing on securing trade agreements such as EVFTA—has attracted global manufacturers and increased FDI in the country, while India’s ‘Make in India’ and the Production-Linked Incentive (PLI) initiative has positioned it as a key player in global supply chains. By enhancing its investment climate, streamlining trade policies, and fostering export diversification, Bangladesh can similarly stabilize its economy, improve foreign exchange reserves, and drive long-term growth.
Bangladesh faces significant economic and governance challenges stemming from past leadership decisions, which continue to affect investor confidence. In November 2024, Moody’s downgraded Bangladesh’s credit rating, citing political instability and economic uncertainty. While the interim government is actively pursuing reforms to restore stability, concerns persist over the effectiveness of these measures in regaining investor trust.
As the country moves toward LDC graduation, ensuring sustainable economic growth requires a stronger focus on trade and investment, especially as the impending loss of preferential trade access poses a major challenge for export-oriented industries. To remain competitive in the global market, Bangladesh must implement strategic policies to foster a business-friendly environment, attract FDI, and strengthen global trade linkages.
However, before achieving these goals, Bangladesh must first address the key barriers hindering trade and investment growth.
Bangladesh continues to struggle with regulatory inefficiencies and bureaucratic barriers, creating a challenging business environment. The World Bank’s Business Ready (B-Ready) report ranks the country 29th overall, yet its operational efficiency score (41.46) lags significantly behind Vietnam (72.78), highlighting key obstacles such as lengthy approval procedures, excessive paperwork, and frequent license renewals.
Establishing a business in Bangladesh can take up to six months, whereas the process is considerably quicker in Vietnam (35 days), Indonesia (49 days), and India (60 days). The absence of independent decision-making bodies further exacerbates delays, slowing regulatory approvals and discouraging potential investors. Additionally, business licensing costs often exceed official estimates, imposing financial strain on enterprises. These inefficiencies not only hinder business expansion and drive-up operational expenses but also contribute to a decline in investor confidence, ultimately impeding economic growth.
Moreover, the high borrowing costs for industries are undermining business sustainability, making it increasingly difficult for SMEs to remain competitive in the market.
Bangladesh’s economic complexity remains relatively low, ranking 113 out of 133 in 2023, according to OEC data. This underscores the country’s heavy reliance on low-value-added industries, particularly Ready-Made Garments (RMG). While the RMG sector has been a key driver of economic growth, its overwhelming dominance has led to limited product diversification and low-value addition, constraining the overall complexity of the economy. Moreover, export diversification beyond RMG remains a significant challenge, as sectors like footwear, jute goods, ceramics, and light engineering struggle to compete internationally. These industries face structural barriers, including high import tariffs, insufficient export incentives, and an anti-export bias, which limit their potential to expand and contribute to a more complex and resilient economy. Addressing these obstacles through policy reforms, targeted incentives, and industrial upgradation will be crucial in enhancing Bangladesh’s economic complexity and long-term growth prospects.
Bangladesh’s taxation framework presents significant challenges for businesses, with supplementary and regulatory duties affecting private investment by reducing profitability, especially in industries facing higher tax burdens. The World Bank’s Doing Business report ranked Bangladesh 151 out of 189 countries in terms of ease of paying taxes, highlighting the complexities and difficulties businesses encounter in complying with tax regulations. Additionally, Bangladesh lags in securing Free Trade Agreements (FTAs), which undermines its competitiveness compared to peer nations. The country’s outdated tax collection system further exacerbates revenue challenges, contributing to a low Tax-to-GDP ratio and limiting fiscal capacity for economic growth.
Bangladesh stands at a critical juncture as it prepares for LDC graduation and seeks to enhance its trade and investment landscape. To drive long-term economic resilience, a multi-pronged strategy focusing on regulatory efficiency, digital transformation, trade diversification, and investment facilitation is essential. The following strategic recommendations outline the key priorities for achieving these objectives.
As Bangladesh approaches its LDC graduation, proactive reforms in regulatory efficiency, financial accessibility, export diversification, taxation, and trade policy will be crucial to sustaining economic momentum. By modernizing its institutions, reducing business constraints, and embracing a knowledge-driven industrial strategy, Bangladesh can unlock new growth opportunities and position itself as a dynamic player in the global economy. With strong commitment and coordinated efforts, the country can transition from a low-complexity, export-dependent economy to a more diversified, resilient, and investment-friendly market.
This article was authored by Sakina Binte Belayet, a Business Analyst at LightCastle Partners. For further clarification, please contact at: [email protected].
[1] World Bank. (2024, April). Bangladesh development update.
[2] The Financial Express. (2025, March 1). July-Nov fiscal deficit Tk 387b.
[3] The Financial Express. (2025, February 5). Jul-Dec current account balance sees surplus.
[4] The Daily Star. (2024, November 17). Moody’s goes negative on Bangladesh.
[6] Economic Complexity of Bangladesh
[7] World Bank Group, Doing Business (2020). Paying Taxes
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