After a challenging year marked by macroeconomic pressures, elevated borrowing costs and prolonged political uncertainty, Bangladesh has begun 2026 with cautious expectations that a post-election political reset could help revive investor sentiment and economic activity.
Although some macroeconomic indicators showed signs of stabilisation towards the end of last year—most notably the exchange rate and foreign exchange reserves—overall investor confidence remained subdued. Economists and business leaders say the impact of last year’s slowdown is likely to persist well into 2026 unless decisive policy action is taken.
Private investment weakened throughout 2025, with central bank data showing private sector credit growth slowed to 6.58% in November, down from 7.66% a year earlier. Foreign equity inflows, which represent fresh overseas investment in company shares and ownership stakes, fell nearly 17% year on year to US $ 554.77 million in the 2024–25 fiscal year. Total net foreign investment rose to US $ 1.69 billion from US $ 1.42 billion, largely due to reinvested earnings rather than new capital inflows.
M Masrur Reaz, chairman and chief executive of Policy Exchange Bangladesh, said investment would remain sluggish through much of 2026 without a credible medium- to long-term economic roadmap. He described 2025 as a year of missed opportunities, noting that while some progress had been made in stabilising the exchange rate and strengthening banking oversight, targeted policies to support small and medium enterprises, exports and job creation were largely absent. He added that limited engagement between the government and the business community further weakened confidence, and said the slowdown reflected deeper structural weaknesses rather than the election cycle alone.
Economists said the easing of political uncertainty following the national election could help unlock deferred investment decisions this year, but only if accompanied by meaningful reforms. Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, said the investment environment remained fragile throughout 2025 and would take time to recover. He attributed weak investment to persistently high interest rates of around 10%, policy inefficiencies and high business costs, despite initiatives such as the One Stop Service. He also pointed to sluggish export growth, low imports of capital machinery and challenges in profit repatriation as indicators of subdued private sector activity.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said the past year had been among the most difficult for exporters, warning that a rebound was unlikely within the next six months due to banking constraints, high operating costs and the withdrawal of export incentives under International Monetary Fund-backed reforms.
Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industry, said high interest rates, liquidity shortages and stress in the banking sector continued to weigh on small and medium enterprises, while energy shortages and inflation further eroded business confidence.
Asif Ibrahim, former chairperson of Business Initiative Leading Development, said that with GDP growth estimated at just 3.7% to 3.9% in 2025—the weakest in more than a decade—expectations for 2026 would depend on whether political stability translated into decisive reforms. He said economic diversification, stronger institutions and targeted investment in infrastructure and human capital would be critical to restoring growth momentum in the year ahead.
