Economic momentum slows due to Middle East war
Bangladesh’s economic momentum slowed last month due to the war in the Middle East and the long Eid holiday. Overall economic activity weakened as the manufacturing sector slipped into contraction and the pace in the agro-processing sector declined significantly.
The trajectory of the economy is measured monthly through the Purchasing Managers’ Index (PMI).
Over the past year, the economy has shown alternating trends, expanding one month and slowing the next. Most recently, the PMI fell by 2.2 points to 53.5 last month. In February, the PMI stood at 55.7, while in January it was 53.9.
The PMI is jointly prepared by the Metropolitan Chamber of Commerce and Industry (MCCI) and the research organisation Policy Exchange of Bangladesh. The PMI for March was released on Wednesday.
The index is based on the opinions of executives from 400 private-sector firms across the economy’s major sectors -- agro-processing, construction, manufacturing, and services.
Data is collected on raw material purchases, new orders, employment, and other indicators. The PMI is measured on a scale from 0 to 100: a reading above 50 indicates expansion, while below 50 indicates contraction.
Entrepreneurs participating in the survey said business conditions across the country’s major economic sectors remain mixed. Seasonal demand ahead of the holy month of Ramadan and Eid-ul-Fitr has had some positive impact. However, high costs and uncertainty remain major challenges. While sales are expected to rise in the services and retail sectors due to festive demand, most firms reported pressure on profits from rising costs of raw materials, labour, transport, and utilities.
Entrepreneurs also said that new orders have declined in the manufacturing and construction sectors. Investors are taking a cautious approach to investment decisions, and buyers are similarly cautious in placing orders. Political and global uncertainties are also affecting business confidence.
Most respondents in the survey said that business conditions could gradually improve in the coming months if the macroeconomic and political situation stabilises.
M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, said, “Last month’s PMI indicators suggest that the pace of economic growth is slowing, mainly due to a downturn in the manufacturing sector. The long holiday and the Middle East crisis have created uncertainty in global demand, affecting this sector.”
According to him, “Ongoing conflict has increased inflationary pressure and created risks of supply disruptions, further weakening economic dynamism. If this situation persists, the economy could face greater risks.”