Contraction in domestic and external consumption amid high inflation, import restrictions amid the US dollar crisis, and gas and electricity crunch over the last few months have stymied growth in the manufacturing sector, said a leading business chamber yesterday.

As a result, manufacturing output fell 0.45 percent in the October-December quarter in FY24 from that in the preceding quarter, when there was a 11.6 percent growth.

The manufacturing output had surged 10.88 percent in the second quarter of fiscal year 2022-23, said the Metropolitan Chamber of Commerce and Industry (MCCI) in its January-March quarterly report on the economic situation in Bangladesh.

The share of the manufacturing sub-sector in the economy also decreased to 24.66 percent in the second quarter of FY24 from 25.90 percent in the preceding quarter, it said.

The MCCI said due to the world's present geopolitical scenario, the overall growth in the industrial sector reduced to 3.24 percent in the second quarter of FY24, from 9.63 percent in the first quarter of the fiscal year.

The industrial sector, as a subsector of gross domestic product (GDP), recorded a 10 percent growth in the second quarter of FY23, according to estimates of the Bangladesh Bureau of Statistics (BBS).

The BBS said Bangladesh's GDP growth nearly halved to 3.78 percent in the second quarter of FY24 from 6.01 percent in the previous quarter and 7.08 percent year-on-year.

The statistical agency projects a 5.82 percent growth in FY24.

"The brunt of the conflicting situation in the world, especially in the Middle East, may affect the social, political, and economic aspects of Bangladesh as well as the whole world," said the MCCI.

"This conflict may have some effect on the country's economy, according to experts," it added.

The leading chamber, however, said the economy has been showing some signs of improvements in the last January-March quarter.

"Exports and imports are two important drivers of the economy, and amid the present situation, both have done comparatively better," it said in the report.

It said the agriculture sector performed better in the second quarter of FY24 than the previous quarter because of favourable weather and government efforts towards ensuring the timely availability of inputs and finance.

Yet there are concerns.

The MCCI said there was a slowdown in external demand.

It said remittance inflow remained weak while there was a shortfall in revenue collection from the target and public expenditure remained sluggish.

The chamber also cited rising inflation, depreciation of the taka against the US dollar, a decline in foreign exchange reserves, and low investment in recent months.

It said the real estate business has been sluggish, mainly because of high costs of property and a drop in the purchasing power of people as Bangladesh was yet to see tangible economic growth.

The MCCI cited sector insiders, saying they blame rising bank lending rates for a slowdown in business as it was weighing down sales despite people's unmet demand for housing.

The MCCI said the government took quick and decisive measures to address the economic fallouts.

"The government also needs to take more actions to ensure a stable foreign exchange reserve, manage inflation, enhance revenue earnings, ensure proper electricity and gas supply for economic activities, reduce the cost of doing business," it added.

The MCCI said the government needs to put in the effort to find new markets for exports, promote economic diversification by revisiting the incentive structure, and protect small businesses and low-income people.