Bangladesh faces economic reckoning as LDC status ends by 2026
Bangladesh stands at a critical economic crossroads, according to Policy Research Institute of Bangladesh chairman Zaidi Sattar. He has urged the government to push for bold reforms and secure a free trade deal with the European Union within the next two to three years.
The call comes as the country prepares to lose its least developed country (LDC) status, a shift that will reshape its trade advantages and global competitiveness.
Sattar compared Bangladesh's current challenges to the major reforms of the early 1990s. He warned that without urgent structural changes, the country's growth could stall at around 5.5 to 6 percent once political stability returns. Recent economic shocks have already slowed expansion to roughly 4 percent, though long-term potential remains higher.
He stressed that global trade shifts, including the India-EU free trade agreement, threaten Bangladesh's key exports—particularly garments. If unaddressed, these changes could weaken the country's position in international markets.
On a positive note, Sattar highlighted the 2024 Bangladesh-Japan Economic Partnership Agreement (EPA) as a significant step forward. The deal has expanded market access with fewer obligations, while trade ties with Germany—Bangladesh's largest EU partner—have also strengthened. Textile exports to Germany hit €5.8 billion in 2025, boosted by GSP+ tariff benefits due to take effect after LDC graduation in 2026. However, stricter EU rules on labour rights and environmental standards led to temporary export declines in early 2025.
Sattar insisted that with decisive reforms, Bangladesh could achieve 7 to 8 percent growth. But he cautioned that sticking to 'business as usual' would leave the economy vulnerable in an evolving global trade landscape.
The next few years will be crucial for Bangladesh's economic future. Securing an EU free trade agreement and implementing deep structural reforms could determine whether the country maintains its growth momentum or falls behind.
Failure to act risks lower growth rates and weakened export competitiveness, particularly in the garment sector.
