A slowdown in exports and weak remittance growth are the new challenges for Bangladesh. Challenges on the external front include: a protracted slowdown in key export markets (particularly the EU) and a further weakening of remittances. The EU and the US account for over 70 per cent of exports, and weaker growth, together with retreat from trade liberalisation, could adversely affect export growth, mainly the garment industry, with a negative impact on the balance of payments. A sustained appreciation of the US dollar could erode Bangladesh's cost advantage and harm export competitiveness.
Bangladesh needs to boost private investment to sustain high growth. A significant increase in public investment is also necessary to maintain competitiveness and generate further productivity growth. The delayed VAT law should be implemented. In addition, structural reforms, strengthening institutions and capacity development remain priorities to unleash the full potential of the economy.
Many of Bangladesh's economic institutions and governing practices will need to be upgraded to support its transition toward middle-income status and as the country becomes more integrated globally. Other policies should seek to foster resilience, diversify the economy, and promote inclusive growth, including by addressing infrastructure and capacity gaps, while preserving debt sustainability. Low energy prices provide scope for scaling back subsidies.