Bangladesh's economy is caught in a structural trap that is pushing households into debt and holding back investment, according to a new report by the Power and Participation Research Centre (PPRC).

The report, "State of the Real Economy: Dynamics of Reversals and Resilience in Bangladesh", was launched in Dhaka on Saturday, the International Day for the Eradication of Poverty. It draws on a survey of 8,067 households across the country's eight divisions carried out in May 2025, Prothom Alo reported.

PPRC executive chairman Hossain Zillur Rahman said the problems went well beyond the poverty rate. "This is not a temporary economic downturn. The economy is caught in a deep structural trap, and breaking out of this trap is the biggest challenge," he told the launch.

The survey found that 27.93 percent of people were living below the upper poverty line in May 2025, up from the 18.7 percent the Bangladesh Bureau of Statistics reported in 2022, while extreme poverty rose to 9.35 percent from 5.6 percent. Another 17.97 percent of households were a "fragile middle class" — about 31 million people — living above the poverty line but with little capacity to spend. More than half of them owed more than they had saved, the report said.

The squeeze shows up in monthly budgets. A middle-class household earned Tk 32,685 a month on average and spent Tk 32,615, leaving just Tk 70, the report found. The poorest 10 percent of households earned Tk 8,477 and spent Tk 12,294. For the bottom 40 percent, monthly income was below Tk 15,000, and 54.9 percent of their spending went on food, leaving little for education, transport or healthcare. About two-thirds of the households surveyed said medical costs were a main cause of their financial strain.

The second part of the trap is stagnant investment. Both private and public investment fell in the last financial year, and net foreign direct investment dropped 15 percent, with new capital investment down 70.3 percent, PPRC said. It also pointed to weak employment and underemployment, and said a mismatch between the skills of educated young people and the jobs on offer was adding to the problem.

The third part is governance and political economy, the centre said. It noted that the tax-to-GDP ratio has fallen below 7 percent and that bad loans in the banking sector rose to 33.2 percent by June 2026.

PPRC set out five priorities for recovery: economic democracy and fair competition, new growth drivers beyond garments and remittances, quality education and skills, helping small firms grow into large exporters, and a faster, more accountable administration.

At the same event, Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, warned that poverty and inequality could be higher than estimated if poverty lines were not adjusted for inflation, and called for stronger revenue collection and closer links between farmers, industry and export markets. Jean Pesme, the World Bank's country director for Bangladesh and Bhutan, said the economy needed urgent structural change in trade, public finance and energy efficiency.