BIDS’ new model sees Bangladesh growth at 4-5%

Bangladesh's economy could grow by around 4 to 5 percent in the coming year, according to a preliminary macroeconomic model developed by the Bangladesh Institute of Development Studies (BIDS), its Director General Dr AK Enamul Haque has said.

The estimate offers a more optimistic outlook than several international forecasts, with the World Bank projecting growth of 3.4 percent only last month and the IMF forecasting 3.2 percent. The ADB, however, projected 4 percent growth in November.

Meanwhile, the BIDS model is still under review and has not yet been formally released.

Dr Haque said BIDS had developed a preliminary macroeconomic model to assess the country's economic performance and outlook.

The initial results indicate that growth could remain in the 4-5 percent range, rather than falling to around 3 percent.

The government has set a GDP growth target of 6.5 percent for the current fiscal year, but Dr Haque said achieving that level would be difficult under the present economic conditions.

BIDS expects to finalise its model and formally release the findings around December, he said.

Dr Haque, an established economist specialising in natural resource economics, environmental sustainability and socio-economic development, joined BIDS as its Director General in March 2025.

He holds a PhD in Natural Resource Economics from the University of Guelph in Canada and has served as a professor of economics at several universities in Bangladesh.

Established in 1957 as the Pakistan Institute of Development Economics and renamed BIDS in 1974, the institute is an autonomous public research organisation.

It conducts multidisciplinary, policy-oriented research on Bangladesh's economy and development challenges and provides evidence and policy recommendations to support government planning and decision-making.

Explaining the preliminary growth estimate, Dr Haque said the model considered several economic indicators, including consumption, remittances, exports, foreign exchange reserves, imports and government expenditure.

He said domestic consumption had remained relatively stable, while remittance inflows and export performance had supported economic activity. Domestic tourism was also showing signs of growth.

Although private-sector credit growth remained sluggish, he said there had been no major disruption in import volumes or the supply of goods in the domestic market. The country's existing productive capacity was still meeting much of the demand.

He also noted that foreign exchange reserves had not experienced a significant decline despite pressure from higher international oil prices.

However, government development expenditure, particularly implementation of the Annual Development Programme (ADP), had slowed compared with previous years. This was one of the major weaknesses in the economy, he said.

Dr Haque said the model was based on both short-term behavioural relationships and longer-term economic equations.

The absence of complete and updated economic data, however, remained a limitation in assessing the country's actual growth performance.

He said the government would not be able to achieve its 6.5 percent growth target, but the preliminary BIDS assessment did not indicate a sharp slowdown to the levels suggested by some external projections.

On the impact of higher global oil prices, Dr Haque said the consequences for growth would depend partly on how much of the increase was passed on to consumers and businesses.

In a hypothetical scenario in which the government passed on the full increase in international oil prices, economic growth could fall to around 1 percent, he said. However, the government had not fully passed on the additional cost to the domestic market.

He cautioned that higher fuel and fertiliser prices could raise agricultural production costs and put further pressure on food prices. Bangladesh's domestic food production, however, could help cushion some of the impact.

Turning to policy priorities, Dr Haque said the government should focus on supporting existing industries and strengthening their supply chains rather than relying solely on new entrepreneurship initiatives.

He cited established business groups such as PRAN and Meghna as examples of companies with extensive production and distribution networks that support economic activity and employment.

He said initiatives to support young entrepreneurs could be useful, but their overall contribution to the economy would remain limited unless existing productive businesses also received a stable and predictable policy environment.

He also stressed the need for rule-based governance, saying businesses should not face political interference or selective treatment. Public funds and financial support schemes should be distributed transparently and according to established rules.

On the banking sector, Dr Haque said Bangladesh Bank should reconsider its regulatory approach to encourage banks to lend more to productive private-sector businesses.

He suggested setting limits on the proportion of deposits banks could invest in government securities so that excess liquidity could be channelled towards creditworthy private investors.

Banks should earn profits by financing businesses and economic activity rather than relying excessively on risk-free investments in government securities, he said.

He added that restoring governance and discipline in the banking sector was essential for reviving the capital market. Without addressing irregularities and weaknesses in banks, a sustainable recovery in the stock market would remain difficult.