Can Bangladesh reach a $1tn economy as private investment languishes?

Highlights:

• Govt projects private investment at 21.33% of GDP in FY27, rising only to 21.65% by FY29
• Private investment was around 23-24% of GDP a few years ago
• Revised estimate for FY26 is 21.22%, down sharply from original target of 26.2%
• Despite weak investment projections, govt expects GDP growth to rise from 6.5% in FY27 to 7.5% in FY29
• Economists say higher growth is unlikely without stronger recovery in private investment

The government projects private investment at 21.33% of GDP in FY27, rising only to 21.65% by FY29. Three years. Barely half a percentage point of movement.

That raises a difficult question: is such a little increase enough to put Bangladesh on a higher growth path and move it toward its target of becoming a trillion-dollar economy by 2034?

The numbers come from the government's Medium-Term Macroeconomic Policy Statement for FY27 to FY29, which quietly acknowledges what analysts and businesses have been saying for months: private investment is unlikely to rebound anytime soon.

A few years ago, private investment was at around 23-24% of GDP. The original budget for the outgoing fiscal year projected it at 26.20%. The revised estimate for the same year is only 21.22%, a collapse of nearly five percentage points. Yet the government's three-year outlook shows only a marginal recovery from that sharp decline.

Infograph: TBS

At the same time, the government projects GDP growth rising from 6.5% in FY27 to 7.5% by FY29. Economists argue that these two projections are difficult to reconcile: sustained higher growth naturally requires a much stronger rebound in private investment.

"When private investment was at 24% of GDP, we achieved 6.5-7% growth - at best," said Fahmida Khatun, executive director of CPD. "With private investment at 21%, the same growth rate is not achievable. And the trillion-dollar economy requires growth above 9%, which is simply impossible without significantly higher private investment."

Ahsan H Mansur, former governor of Bangladesh Bank, was equally direct. The private sector accounts for 86% of total investment in Bangladesh. The government accounts for 13-14%.

"If that 86% does not move, there is no trillion-dollar economy and no 7% growth, regardless of what the government does with the remaining 14%," he told TBS.

The government's own medium-term statement plans to raise public investment from 10.75% (provisional) of GDP this year to 15.17% by FY29. But, Mansur questioned both the financing and efficiency of that plan. Revenue collection is falling short; the NBR has already missed its target by Tk1.04 lakh crore in the outgoing fiscal year's first ten months alone.

Borrowing from domestic sources to fill the gap will crowd out private credit further. And government spending, he noted, does not arrive efficiently; a portion never reaches the ground level at all.

Countries that have sustained annual growth of 6-8% over long periods typically maintained much higher investment rates. Investment exceeded 40% of GDP in China and remained above 30% in both Vietnam and India.

Even at Bangladesh's peak growth phase, total investment stood at around 31% of GDP, with the private sector contributing about 24 percentage points. Today, Bangladesh's investment ratio is only 28-29%, well below the levels usually associated with sustained high growth.

Pvt credit signal is flashing red

Private sector credit growth is the leading indicator of investment momentum. The trend is alarming.

It was 6.5% in FY25, already low by historical standards. By April 2026, it had fallen to 4.72% in March and 4.75% in April this year, the lowest on record.

"Private credit growth tells you what new investment looks like before it happens," said a senior Bangladesh Bank official who declined to be named. "What we are seeing now tells us that significant investment momentum is not coming soon."

The central bank plans to ease monetary policy and has projected private credit growth recovering to 9.4%. But the same official acknowledged that structural weaknesses in the banking sector are blocking credit transmission, meaning that even if interest rates fall, the credit may not reach the businesses that need it.

The policy rate is being held at 10% in the short term due to inflation and Middle East-related energy uncertainty. The plan is to cut it to 9.5% in FY2027 if conditions improve. But with inflation still above 9% and geopolitical tensions threatening further fuel cost increases, the timeline is uncertain.

Can public investment compensate?

The government's answer to the private investment shortfall is to increase public investment sharply – from 6.8% in the original budget of the outgoing year to 10.75% of GDP (provisional) this year. Then it will shoot up to 15.17% of GDP by FY29, with priority given to power, energy, communications infrastructure, and human capital.

The medium-term statement argues that deregulation, fiscal and financial sector reforms, inflation stabilisation, and gradual monetary easing will together stimulate both public and private investment over the period.

However, Fahmida said the government does not have the resources to finance the projected public investment without external borrowing. "Only government investment cannot make the economy dynamic. It can create the conditions for private investment, but it cannot substitute for it."

What this means for jobs

Economists said private investment does not just drive growth. It drives employment. New factories, new businesses, new ventures, which generate jobs at scale. Government infrastructure spending creates temporary work, but not the sustained, formal employment that Bangladesh's labour market needs.

The evidence of that mismatch is already visible. For 2,400 banking and financial sector jobs advertised in 2025, 42.57 lakh applications were submitted. For 11,342 garment positions, the number was 52.18 lakh. The labour supply is enormous. Economists said the demand is not keeping up and it will not keep up as long as private investment remains anchored at 21% of GDP.

The government's budget contains genuine incentives – tax predictability for five years, deregulation, full duty waivers of solar and all related components, and alternative financing instruments. These are the right signals. But signals take time to translate into investment decisions, which take time to translate into factories, which take time to translate into jobs, economists said.