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Overview of the Economic Activities of Bangladesh in 2009

Overview of the Economic Activities of Bangladesh in 2009

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Published by ashek ishtiak haq
Khubi nimno maner economic review.
Khubi nimno maner economic review.

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Published by: ashek ishtiak haq on Sep 14, 2010
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Overview of the Bangladesh Economy in 2009
Ashek Ishtiak Haq
MBA 41-IBA, BBA 7th-DUPhone: 01720594959Address: 31st Siddeswari Lane, Dhaka-1217http://www.facebook.com/ashek.haq Bangladesh has remained an exemplary economy in the face of the global financial crisis. It hasproved to be decoupled from its effect. The economy not only registered
 
a 5.9% GDP growthperformance but also recorded stellar performance of the agriculture sector, posted buoyantremittance flow and ended with historically highest record level of forex reserves. Resilience is infact something that defines Bangladesh. Although, the country gets hit by mammoth naturaldisasters almost every year, its per capita income has advanced to a level of USD700 (frombelow USD200 in 1972) with major chunk of the achievement made since the opening up of theeconomy in 1991. The central bank is predicting that by 2013 the country will achieve the statusof middle-income country. The annual GDP growth rate during this period ranged between 5% to6.5%. The food production has tripled to a very impressive figure of 30 mn tonnes in 2008 froma meager 10 mn tonnes in 1972. The country has also made impressive progress in socialindicators such as the infant mortality rate, access to healthy sanitation facility, primary schoolenrollment, literacy rate, and life expectancy. In April, Moody’s and S&P assigned their first-eversovereign ratings to Bangladesh, which is three-level below the investment grade at a similarlevel to the Philippines, Indonesia, and Vietnam, and well above the ratings for Pakistan and SriLanka. Favorably the new ratings should help to ease the cost of capital, encourage more FDI,and reduce import and export costs (as the price of LCs should now fall).However, the year 2009 has presented the economy with some severe challenges such assignificant volatility in export earnings, deficiencies in power, gas, and basic infrastructure,decreasing job opportunities in the overseas market, inflationary trends gaining steam anddepressed investment trends.
GDP
The limited openness of the economy and strengthened domestic demand has helpedBangladesh to mitigate the most of the effect of the global recession. 
Population (mn,Provisional) 144.20 Population growth1.26%Nominal GDP (USD bn) 89.38 Real GDP growth5.90%GDP, (USD bn, purchasing powerparity, est ) 242.40Inflation (12-monthsaverage)5.95%GDP per capita (USD; markerexchange rate ) 620.00Total investment % to GDPat current market price24.18%GDP per capita (USD; purchasingpower parity) 1,465.00Total consumption % toGDP at current marketprice79.98%Exports (USD bn) 15.60 Imports (USD bn)20.3Exchange rate (av) Tk:USD 69.11Forex reserves (March2010, USD bn)10.14
Bangladesh at a Glance (2008-09)
Source: Bangladesh Bank, IMF 
 
 
The almost 6% GDP growth in FY09 has been possible due to the strong performance of theagriculture and service sector, while the growth in the industrial sector has stalled due to theweakened export demand. Agriculture sector’s growth in FY09 was 4.6% helped by favorableweather and optimistic price expectation. Major growth drivers in the agricultural sector were thecrops and horticulture, and animal farming sub-sectors. The growth in service sector hasdropped slightly to 6.3% in FY09 from 6.5% in FY08. Accounting for some fluctuations, thegrowth is spread over all the subsectors. The lower growth in the Wholesale and retail sectorresulted because of the fall in the industrial production and commodity imports.
Industrial Growth
The growth in industry sector has dropped to 5.9% in FY09 from 6.8% in FY08. The drop ingrowth of the manufacturing subsector is the most significant, caused by decline in export inmost of the items except for apparels and textiles. From 7.2% in FY08 it dropped to 5.9% inFY09. The mining and quarrying sub-sector enjoyed increase in growth. The growth for power,gas and water supply subsector dropped 2.3% to 4.5% in FY09 signaling the inadequacy of physical infrastructure. Both large and medium scale and small scale industries endured dip intheir growth, registering 5.7% and 6.6% expansion in FY09 compared to 7.3% and 7.1% growthenjoyed in FY08. The shock to the small scale industry was relatively smaller due to its immunityfrom the external sector. However, the things are looking up as, the Quantum Index of IndustrialProduction showed a growth of 7.4% during FY09 over FY08. Quantum index of small scalemanufacturing industry also increased by 7.9 percent during FY09 over FY08. A survey by theIFC also showed business confidence and investment have been picking up since October lastyear.
020406080100FY04 FY05 FY06 FY07 FY08 FY09FY10F
   i   n   b   n   U   S   D
Fiscal Year
Nominal GDP 2004-2010
5.25.45.65.866.26.46.6FY04 FY05 FY06 FY07 FY08 FY09 FY10F
   %
Fiscal Year
Real GDP Growth, % yoy
0246810FY 03FY 04FY 05FY 06FY 07FY 08FY 09
   %
Growth Rate of the Major Sectors, 2003-09
Agriculture Industry Services Overall GDP
20.60%49.70%29.70%
Sectorwise GDP Composition 2009
AgricultureServicesIndustry
 
 
Agriculture
A major structural change has been observed regarding the decline in the share of agriculturalGDP over the last four decades. From an agro-based economy in the 70s the country hastransformed into a service-based economy. The agricultural share has dropped from over half of total GDP during 1970s to about one third during the 1980s. The current share contributed bythe agricultural sector is about 21%. Despite such decline, the impact of agriculture is stillpredominant over the economy. It still employs half of country’s labor force most of whom areconcentrated in the rural areas.Major policy decision such as the timely downward revision of fertilizer prices, subsidy for diesel,timely availability of and subsidy for electricity for irrigation have contributed to the production of 32.16 mn MT rice and wheat in FY08-09. This amounted to 8.1% higher growth than thepreceding year. The target for FY09-10 has been set at 35.25 mn MT, which is 9.6% higher thanlast year. It will majorly depend upon the output performance of the upcoming Boro crop, thetarget for which has been set at 19.0 mn MT.
Inflation
After reaching the lowest level at 2.25% in June, point-to-point CPI inflation edged up to 6.71%in October, with both food and non-food prices registering a significant increase. The inflationrate crossed 9% mark in February 2010. The disquieting factor is the higher food inflation rate of 10.93%. According to the Bangladesh Bureau of Statistics (BBS) data, the inflation in urbanareas increased more compared to that in rural areas.
024681012FY 03FY 04FY 05FY 06FY 07FY 08FY 09
   %
Trends in Industrial Growth
Industry, as a wholeMining and quarrying Manufacturing Large and medium scaleSmall scale Power, gas and water supply Construction
0100200300400500600700FY 03FY 04FY 05FY 06FY 07FY 08FY 09
   i   n    b   n   t    k
Contribution of Agriculture in GDP
Agriculture Crops and horticulture Animal farming Forest and related services

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