Bangladesh’s Economy Experiences a Significant Downturn in July

In July, Bangladesh’s economy experienced a severe downturn, according to the latest Purchasing Managers’ Index (PMI). The PMI dropped sharply by 27 points from the previous month, falling to 36.9—well below the neutral 50-point mark, which signifies no change in economic conditions. This sharp contraction is attributed to significant disruptions caused by political violence, internet outages, and curfews imposed by the previous government in an attempt to control widespread protests. The PMI, based on surveys from over 500 private sector enterprises, reveals a downturn across all major sectors including agriculture, manufacturing, construction, and services.

The Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh, which developed the PMI, reported that the agriculture sector suffered a notable contraction after six months of growth. This decline is reflected in reduced indexes for new business, activity, and employment, though input costs saw faster expansion. The manufacturing sector also faced a downturn, ending seven months of expansion. Key indexes such as new orders, exports, factory output, and supplier deliveries showed sharp contractions. However, input purchases and prices saw faster expansion, and the finished goods index returned to growth, despite slower expansion rates for imports and order backlogs.

In construction, the sector reverted to contraction after seven months of growth, with significant declines in new business, construction activity, and employment. Nevertheless, input costs expanded at a slower rate, and the order backlog index showed some growth. The services sector reported a sharp contraction following seven months of expansion, with declines in new business, activity, and employment. The input costs index showed slower expansion, and the order backlog index experienced a slower rate of contraction.

Despite these challenges, the future business index presents a glimmer of hope, with potential expansions anticipated in the construction and services sectors, although agriculture and manufacturing face slower growth prospects. The MCCI commented on the situation, noting the profound impact of recent political unrest on the economy and expressing cautious optimism for future recovery as conditions stabilize.

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