Production growth in Bangladesh slowed significantly in the July-March period of 2022-23 due to the global economic slowdown and gas and electricity shortages at home, according to the Bangladesh Bureau of Statistics (BBS).

The average production of large and medium manufacturing units grew 9.02 per cent in the first nine months of the previous fiscal year, down from 16.5 per cent in FY22, shows BBS data compiled by the Bangladesh Bank.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, said their production levels have fallen due to slower export demand and some domestic issues.

"Currently, our export orders have declined and it may decline further in the coming days."

For example, the ongoing recession in Germany, a major export market for Bangladesh, recently became acute.

"So, we do not have a ray of hope for increasing sales in the coming days," Hatem said.

The entrepreneur also mentioned that the domestic gas and power crisis contributed to slower production growth in knitwear industries.

Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries, said the global market situation has affected domestic industrial production.

Following the fallout of Covid-19 and the Russia-Ukraine War, the global market has become unstable and sales dropped significantly.

"As a result, the domestic market is suffering from it."

Chowdhury pointed out that the US and the EU have lowered their imports by more than 13 per cent and 15 per cent, respectively.

"So, the reduced growth in factory output is not so bad considering the decreased demand from these two major markets. Besides, existing problems in backward linkage in the manufacturing sector are continuously contributing to low productivity."

The BBS collects production data from 2,040 factories, both public and private, on a monthly basis to assess the movement of factory output.

The sectors include wearing apparel, textiles, food products, leather and leather goods, basic metals, chemicals and chemical products, fabricated metal products sans machinery, pharmaceuticals, and non-metallic mineral products.

Talking to The Daily Star, Zaidi Sattar, chairman and chief executive of the Policy Research Institute of Bangladesh, said production growth has slowed due to compressed imports.

Imports declined by about 12 per cent in the July-March period of FY23.

Sattar said that the country's exports, which are primarily manufactured goods, require imports.

"So, import compression will have a dilatory impact on production and consequently, on GDP growth."

The slower manufacturing growth is also reflected in the GDP growth estimate of 6.03 per cent for the previous fiscal year compared to 7.1 per cent in FY22.

The economist said 2021-22 was a record year in terms of exports as well as factory output.

Sattar suggested the government move away from import control measures, such as limiting or delaying opening letters of credit, and selecting import products.

"These were correct as emergency measures to bring the current account deficit to a sustainable level, and that has been achieved. Now, it is time to let the market mechanism take care of trade and the current account balance."

The former World Bank economist said the taka's depreciation against the US dollar by 25 per cent over the past year should be enough to restrain imports and drive appropriate resource allocation.

Moreover, the depreciation has provided a boost to exports that still have good potential as the "China Plus One" geo-economic strategy is taking deeper roots.

"Vietnam and Bangladesh have been cited as the biggest beneficiary of this trend, which is a plus factor for Bangladesh going forward. We need to make the most of it," Sattar added.

Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, said the slower growth in factory output indicates Bangladesh's performance in the export market.

"The restrictions on raw material imports might have contributed to lower production."

However, he believes export-oriented production may increase by the end of the current fiscal year.

"It appears the demand for domestic market-oriented products has declined. It may be that the buying power of people has not increased while production costs have risen."