Bangladesh's economy is facing mounting stress from the region's highest inflation, a widening poverty rate, a sovereign credit downgrade and sluggish private investment, according to a biannual economic review presented by the Dhaka Chamber of Commerce and Industry (DCCI) on Saturday.

The paper, styled "Biannual Economic State in FY2026: Fiscal & Monetary Perspective and Private Sector Expectations (January-June, 2026)," was presented on behalf of the DCCI Board of Directors by its President, Taskeen Ahmed, at a seminar held at the DCCI Auditorium in Motijheel.

The report showed the economy grew 4.14 percent in FY26, with GDP estimated at USD 501 billion, even as inflation climbed to 9.16 percent in June before easing slightly to 8.32 percent in July, still, the paper noted, the highest in South Asia.

Poverty has worsened alongside the price pressures. The report put the upper poverty rate at 21.4 percent in 2025, up from 18.7 percent in 2022, and warned that the Middle East conflict could push another 12 lakh people into poverty by 2026 amid a 6.70 percent rise in the FAO Food Price Index between January and June.

The DCCI paper flagged a further blow to investor confidence: Moody's downgraded Bangladesh's long-term sovereign credit rating to B2 from B1. Private investment as a share of GDP stood at only 21.2 percent in FY26, while net foreign direct investment fell 44.4 percent to USD 1 billion from USD 1.8 billion a year earlier, according to UNCTAD data cited in the report.

Foreign exchange reserves stood at USD 31.53 billion, remittances at USD 35.56 billion, while total exports slipped 0.58 percent to USD 48 billion even as imports surged nearly 19 percent to USD 75.24 billion.

On the fiscal side, the report noted a total budget outlay of Tk 9.38 trillion (13.7 percent of GDP) against a revenue target of Tk 6.95 trillion, with the deficit projected at 3.6 percent of GDP. It warned that rising interest payments, Tk 1.05 trillion in domestic and Tk 22,500 crore in foreign obligations, are squeezing fiscal space, and that the revenue target remains ambitious given the country's persistently low tax-to-GDP base.

On monetary policy, the central bank has held the policy rate at 9.5 percent, with private sector credit growth languishing near a two-decade low, even as public sector credit is projected to grow 17-22 percent, "crowding out" private borrowing.

Non-performing loans stood at Tk 5.57 trillion, around 30.6 percent of outstanding loans, while stock market capitalisation remained thin at 6.22 percent of GDP.

The report also flagged sector-specific strains: RMG exports declined 0.15 percent in the second half of FY26, with over 400 factories shut over the past three years; the leather sector remains stuck in low-value exports due to weak certification and processing capacity; and the pharmaceutical industry continues to rely on imports for 85 percent of its active pharmaceutical ingredients (APIs).

On the upside, the paper pointed to new budget measures aimed at improving the investment climate, including 48-hour digital company registration, duty-free bond facilities for 10 sectors, and repatriation of up to Tk 100 crore without Bangladesh Bank pre-approval.

The DCCI paper called for a range of measures, including capping domestic bank borrowing in favour of concessional external financing, accelerating digitalisation of tax administration, strengthening capital markets through corporate bonds and Sukuk instruments, and pairing monetary tightening with fiscal discipline to address cost-push inflation.

It also urged the government to prepare more robustly for Bangladesh's graduation from Least Developed Country (LDC) status, warning of a potential USD 17.5 billion export loss from the withdrawal of trade preferences, and recommended a further extension of the transition timeline beyond November 24, 2029, alongside expanded free trade and preferential trade agreements.