After months of political unrest, soaring food prices, and currency swings, Bangladesh’s economy is slowly finding its footing. Inflation is easing, growth is picking up, and remittance inflows have reached record highs, according to the Planning Commission’s latest “Economic Update and Outlook: May 2025” report.
According to the report by the General Economics Division (GED) of the Planning Commission, both fiscal and monetary policy measures were taken to ease inflationary pressures in April. The report, released on May 24, highlights how demand and supply measures were in place to manage inflation.
In the second half of the fiscal year 2025, the Bangladesh Bank implemented a contractionary monetary policy. In addition to managing inflation, it also stabilized exchange rates.
In addition to the monetary measures, expansionary fiscal measures were also carried out. Tariffs on essential food items, such as rice and edible oils, were reduced. This eventually led to lower inflation among such food imports. In the fiscal year 23–24, inflation was a primary concern, where food inflation reached double digits at 10.65% in Bangladesh.
Coincidentally, favourable weather conditions and the absence of natural shocks such as floods also ensured a smooth supply of seasonal produce. According to the report, “These combined efforts are crucial for achieving the target of bringing inflation down to 7–8% by the end of June 2025.”
Inflation has been steadily falling since November 2024. The largest contributor to inflation, food, contributes 42.2% of overall inflation. However, food inflation fell to single digits for the first time in a year in February 2025. Since November, the state of food inflation has started improving with the availability of winter vegetables. Food inflation fell from 8.93% in March to 8.63% in April. General inflation also showed a similar pattern, reducing by 0.18% from 9.35% in March compared to April’s 9.17%.
The report showcased the significance of changes in the food category. Among food inflation, rice prices took a sharp turn from 34% in March to 40% in April, which is an indicator of a supply shortage. The reason identified in the report is the flash floods in September and October that caused a production shortage in some districts. Medium rice contributed to 19.4% of food inflation, a significant proportion.
Brinjal, which was the top contributor to food inflation in March at 17.12%, reduced to 11% in April, taking third place. The price hike in March could be due to the high demand brinjal faces in Ramadan. Similarly, due to the seasonal demand for hilsa fish during the Bengali New Year, its prices experienced an increase in April. Soybean oil contributed 8.2% and potatoes actually experienced deflation at negative 13.6%. Both potatoes and onions had higher production, which helped keep prices low.
However, there was an urban and rural parity in food inflation, as mentioned in the report. Rural areas experienced significantly higher food inflation at 44.7% and urban areas experienced 36.5%. The report, therefore, mentioned the need for more efficient management of the food supply chain in rural areas.
Other than food, other major contributors to inflation are housing and utilities (13%), clothing and footwear (9.8%), and transportation (7%).
Some policy shifts were recommended by the GED. Among those, direct policies besides the contractionary monetary policy measures were encouraged to tackle inflation. Sufficient and planned food reserves were recommended by the report, which could be distributed to vulnerable groups through targeted food transfer programs.
In relevance with Bangladesh’s shortcomings with its fiscal budget and its capability to subsidize, social safety net initiatives such as school feeding, food-for-work, open market sales (OMS), and guaranteed employment schemes were encouraged. Especially during lean agriculture seasons that lead to food scarcity due to breaks in harvests. The report included how urban areas also require subsidized food distribution, as poor households do not have the means to have reserves of food.
The report highlighted the significance of remittance growth in increasing foreign reserves, besides contributing to growth. In March 2025, Bangladesh experienced a record high inflow of $3.29 billion in remittances. Remittance grew massively from last year, by about 65%. From July 2024 to March 2025 alone, remittance influx was $21.77 billion, which is significantly higher than the $16.69 billion received in the same period of the previous year.
Bangladesh also faced the threat of 37% “reciprocal” tariffs imposed by the Trump administration in the United States. But Chief Adviser Professor Muhammad Yunus wrote in a letter to President Trump to hold off on the tariffs for three months, which was then granted. Bangladesh is now in negotiations with the Trump administration over this issue.
The GED report features the need for the economy to recover from its “weak performance” in the first part of the fiscal year 2025, owing largely to the political instability that resulted in macroeconomic instability. The floods in the first quarter of fiscal year 2025 also negatively impacted growth. In the second quarter, however, growth recovered to 4.48%. According to estimates mentioned in the report, industry growth jumped to 7.1% from 2.4% in the first quarter of fiscal year 2025. In the second quarter, which is October to December 2024, sub-sectors in the industry such as manufacturing, mining and quarrying, and wholesale and retail trade also started to do well.
In addition to reducing inflationary pressures, a stable exchange rate and favorable current account due to export and remittance growth all indicate an overall recovering economy. The huge success of the Bangladesh Investor Summit 2025, which took place in April, has renewed investors’ confidence in the country. The report also expressed the growing commitment to choose sustainable and efficient development projects in order to enhance the quality of growth as well.
