Bangladesh inflation soars to 12-year high of 11.66% amid economic distress

Inflation in Bangladesh has surged to a 12-year high of 11.66% in July 2024, reflecting severe economic distress in the country.

According to the Bangladesh Bureau of Statistics, this dramatic rise is fueled by escalating food and non-food prices, coinciding with widespread national protests.

The inflationary spike is particularly pronounced in the food sector, where prices have skyrocketed by 14.10% in July.

This marks a sharp increase from the 10.42% recorded in June.

Inflation surge compounded by major political crisis

Non-food inflation also climbed to 9.68% from 9.15% the previous month, exacerbating the financial strain on Bangladeshi households struggling with the rising cost of living.

The inflation surge is compounded by a major political crisis. The protests, originally sparked by demands for reforms to the controversial job quota system for government positions, have rapidly expanded into broader anti-government demonstrations.

Students and other citizens have expressed frustration with what they perceive as systemic unfairness and discrimination in job allocation.

The situation escalated dramatically in early August when Prime Minister Sheikh Hasina resigned and fled to India.

The ensuing power vacuum led to the formation of an interim government headed by Nobel laureate Muhammad Yunus.

This political upheaval has intensified unrest, with over 230 people killed in protest-related violence and the total death toll now reaching 560.

The civil unrest has severely disrupted Bangladesh’s economy.

Curfews and internet shutdowns have crippled supply chains and daily business operations.

Key infrastructure, including railways and ports, has also suffered extensive damage, exacerbating the economic turmoil.

Bangladesh’s GDP growth will slow to 5.7% in 2025

The Mastercard Economic Institute (MEI) has adjusted its forecasts in light of the ongoing instability.

The MEI projects Bangladesh’s GDP growth will slow to 5.7% in the fiscal year 2025, down from previous years’ higher growth rates.

Although inflation is expected to remain elevated at 9.8% for FY24, it is anticipated to ease slightly to 8% in FY25 as the country begins to stabilize.

As Bangladesh navigates through this period of economic and political turbulence, the immediate future remains uncertain. The ongoing unrest and government response will likely continue to influence inflationary trends and economic performance. For now, the country faces the dual challenge of addressing both its severe economic issues and the deepening political crisis.