Bangladesh economy caught in ‘structural trap’

Rising poverty, household debt, stagnant investment threaten growth, says PPRC

Bangladesh’s economy is trapped in a cycle of household distress, stagnant investment and weak governance, undermining sustainable growth, according to a new analysis by the Power and Participation Research Centre (PPRC).

The think tank said breaking the cycle requires deep institutional reforms rather than a focus on headline growth targets.

Hossain Zillur Rahman, executive chairman of PPRC, and Namira Shameem, a senior research associate, presented the findings yesterday at the launch of a publication titled, “State of the Real Economy: Dynamics of Reversals and Resilience in Bangladesh”.

“This is not a temporary economic downturn. The economy is caught in a deep structural trap, and breaking out of this trap is the biggest challenge,” Zillur Rahman said.

He said economic challenges went beyond rising poverty, as households faced greater financial vulnerability, inadequate savings and growing debt.

Poverty, which had been declining, is rising again, while the middle class is becoming increasingly fragile, he said.

“The issue is no longer just the poverty rate. We must now consider the dimension of vulnerability, particularly the lack of buffers between household income and expenditure.”

The PPRC survey found that 27.93 percent of the population lived below the upper poverty line in May 2025, while extreme poverty stood at 9.35 percent. Another 17.97 percent of households were vulnerable to falling into poverty.

In 2022, the Bangladesh Bureau of Statistics reported poverty at 18.7 percent and extreme poverty at 5.6 percent.

Household debt also exceeded average savings by 44.6 percent. Among the poorest 10 percent, average debt stood at Tk 62,767, against savings of Tk 19,737, the survey found.

Zillur Rahman said job insecurity, inadequate employment opportunities and underemployment were growing concerns.

More than half of households also had at least one member with a chronic illness, exposing them to repeated healthcare expenses, he added.

He identified stagnant investment and sluggish growth as the second dimension of the structural trap.

“There are countries where households face economic hardship, but investment continues to grow. In our case, however, household distress is accompanied by stagnant or declining investment and sluggish growth,” he said.

The third dimension, he said, is political economy and governance, which determine the country’s ability to address household distress and lack of economic dynamism.

Zillur called for a comprehensive transition compact built around five pillars: economic democracy, new growth drivers, quality education and skills, productive transformation, and faster governance.

“Bangladesh needs new growth drivers,” he said, urging diversification beyond garments and remittances, greater support for promising sectors such as pharmaceuticals, and faster, evidence-based decision-making.

At the event, Prof Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, warned that poverty and inequality could be higher than estimated if poverty lines were not adequately adjusted for inflation.

He called for higher revenue collection to expand public spending, along with improved agricultural productivity and stronger links between farmers, industry and global markets.

Describing quality education as the country’s biggest challenge, he called for greater investment in technical education, digital skills, high-speed internet and emerging sectors to create jobs and improve competitiveness.

Jean Pesme, World Bank country director for Bangladesh and Bhutan, said the economy needs urgent structural transformation in trade, public finance and energy efficiency.

He also stressed the need to align education and skills with private-sector needs to restore confidence and create jobs.

Fazlul Hoque, administrator of the Federation of Bangladesh Chambers of Commerce and Industry, said no sector beyond garments had taken off in the past two decades, leaving the economy increasingly dependent on RMG exports.

He added that degrees no longer guarantee jobs and criticised bureaucratic delays, saying young people will not tolerate visiting government offices 30-40 times to obtain routine permits.

Farah Kabir, country director of ActionAid Bangladesh, said informal workers are struggling with rising food prices and the lack of minimum wage guarantees.

As female employment in the RMG sector declined, she called for alternative jobs in agro-ecology, childcare centres and gender-sensitive investment.