Bangladesh achieves political calm but faces economic risks: Oxford Economics Report

A recent report by Oxford Economics indicates that while political stability has improved in Bangladesh following the formation of a BNP government through national elections, the country continues to face high economic risks.

According to the report, since August, the overall economic risk score for Bangladesh has reached 7.1, significantly above the Asia-Pacific average of 5.1.

Among 164 countries assessed, Bangladesh ranks 141st.

The report notes that peaceful elections have reduced political uncertainty, but full confidence in the economy will take time to restore. Economic risk is measured based on market demand, market expenditure, exchange rates, government debt, and trade credit exposure.

The report highlights trade credit as Bangladesh’s most vulnerable area, scoring a maximum risk of 10. Non-performing loans, particularly in state-owned banks, combined with weak supervision and limited credit data, have complicated the situation. While banks continue to lend to large borrowers and the services sector, household and housing sectors receive comparatively limited credit.

Market expenditure risk is scored at 8, and market demand at 7. Political instability, regulatory challenges, and reliance on remittances have increased these risks. Exchange rate risk remains moderate at 5. Government debt is also assessed as high risk, affected by banking sector weaknesses, low per capita income, and institutional concerns.

Economic growth for FY2025–26 is projected at 4.5%, down from an earlier 4.7%, with a potential rise to 5.7% in FY2026–27. Inflation reached 8.6% in January. Despite tight monetary policy and a 10% policy interest rate boosting reserves, purchasing power remains limited.

Exports, especially in the ready-made garment sector, face new pressures as demand slows in the US and Europe. Contraction in government spending and high borrowing costs are constraining investment growth.

The report concludes that while political calm has returned, structural weaknesses and reform-related risks continue to pose challenges for Bangladesh’s economy.