Bangladesh Faces Record Inflation Amid Political Turmoil; Economic Outlook Shows Potential Decline

In July, Bangladesh saw its inflation rate surge to a 12-year high of 11.66%, a significant increase from the 9.72% recorded in June. This sharp rise is largely attributed to severe political instability driven by violent student protests demanding reforms to a controversial job quota system. According to the Bangladesh Bureau of Statistics, food inflation reached a record 14.10% while non-food inflation climbed to 9.68%, up from 10.42% and 9.15% respectively the previous month. The last peak in general inflation was 9.94% in May.

The unrest began with nationwide protests by the Anti-Discrimination Student Movement, which initially sought changes to the job quota system. The government’s harsh response only intensified the demonstrations, leading protesters to call for the resignation of Prime Minister Sheikh Hasina and her Awami League government. In a dramatic turn of events, Hasina, aged 76, resigned and fled to India, resulting in the formation of an interim government led by Nobel laureate Muhammad Yunus, aged 84.

The violence following Hasina’s departure has been devastating, with over 230 deaths reported in July alone, pushing the total death toll to 560 since the protests began in mid-July. The turmoil also led to widespread curfews and internet shutdowns, severely disrupting supply chains and impacting daily life and business operations. Rail and port services were notably affected during this period.

Looking ahead, the Mastercard Economic Institute (MEI) forecasts a challenging economic outlook for Bangladesh. The institute projects a decline in GDP growth to 5.7% in the fiscal year 2025, down from current levels, while inflation, which is expected to peak at 9.8% in FY24, is anticipated to ease to 8% in FY25.