Assignment on

Bangladesh Economy at a Glance

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 Course Title: Macroeconomics
Course Code: ECO 2114
Section: 3
Semester: Fall ‘19
Submitted to:
Shejuti Haque
Lecturer
Department of Economics
Southeast Business School
Southeast University

Submitted by:
SL NAME ID:
1 Sheikh Fakruddin Ahmed 2017210000049
2 Nabila Islam 2015210000082
3 Habibur Rahaman 2015110000261
4 Noor Jahan Mahmud Vasha 2017210000091

Date of submission: 15th December, 2019

Letter of Transmittal
10th December, 2019

Shejuti Haque

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Lecturer

Department of BBA

Southeast Business School,

Southeast University

House: 64, Road: 18, Block: B, Banani, Dhaka-1213.

Subject: Submission of Report on the economy of Bangladesh at a glance.

Dear ma’am,

With due respect and honor we would like to state that we are the students of “Macroeconomics”
in section-3 of Southeast Business School under Southeast University. You have asked for
making a report on the economy of Bangladesh at a glance, for fulfilling the requirement of this
course. We have tried our level best to prepare the report as per your requirements. Now we want
to submit our report for your approval.

Therefore, we pray and hope that you will accept our report which we have given with the Letter
and oblige thereby.

Yours most obediently,

Sheikh Fakruddin Ahmed

2017210000049

Acknowledgement
In this study an attempt has been made to describe the overall scenario of Bangladesh economy
system. At this time of free economy everyone may be interested to know about the GDP, GNP

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export-import industry and the mechanism of the economy here. The present study has been
undertaken with consideration of this fact.

Bangladesh’s economic freedom score is 55.6, making its economy the 121st freest in the 2019
Index. Its overall score has increased by 0.5 point, with higher scores on factors including
property rights and government integrity countering declines in investment freedom and fiscal
health. Bangladesh is ranked 27th among 43 countries in the Asia–Pacific region, and its overall
score is below the regional and world averages.

So, we can tell by this that our economic chain is climbing the ladder and reaching greater goals
every year.

Hence there is a significant peak in our economy development, Robust economic growth of
approximately 6 percent annually for two decades has been driven by a rapid increase in private
consumption and fixed investment. Nevertheless, Bangladesh still grapples with poor
infrastructure, endemic corruption, insufficient power supplies, and slow implementation of
economic reforms.

Executive Summary

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Global growth moderated to a small extent at the end of 2018, but is expected to start to rise again
from 2019. Regulatory crackdowns on the shadow banking system in China, trade war between
China and the US, natural disasters in Japan and weaker-than-usual sentiment in Europe all caused
a slowdown in global economic growth. However, a more accommodative Federal Reserve policy
stance, economic stimulus in China and recovering market sentiment in 2019 is expected to lead to
growth to recover in 2019 and beyond. Commodity prices fell at the end of 2018 due to waivers
granted to major Iranian oil importers but expiration of waivers in May 2019 is expected to lead to
volatile and higher energy prices in 2019.

The Bangladesh Bureau of Statistics (BBS) released provisional GDP growth figures for FY19
which showed GDP growth had reached 8.13%, the highest rate ever recorded in history. Industry
grew at 17.61%, led my Manufacturing which grew at 19.28%. Construction grew at 15.78% in
FY19. Service and Agriculture sectors grew at 12.1% and 9.13% respectively. The Agriculture,
Industry and Service sectors account for 13.31%, 31.31% and 55.38% respectively.

General inflation remained subdued at 5.48%, squarely within central bank target range of 5.30%-
5.60%. Food inflation decreased from 6.21% in December 2018 to 5.76% in March 2019, helped
by adequate stocks of food grains along with a bumper harvest in early 2019. Non-food inflation,
on the other hand, witnessed a rise from 4.51% in December 2018 to 5.03% in March 2019.
Prospects for food inflation remain muted in the future due to adequate stocks of food grains amid
healthy harvests, but non-food inflation is likely to rise even further as the BDT depreciates against
the USD, driving up the cost of imported products while a planned domestic fuel price hike by the
government causes a further spike in non-food inflation. Overall, inflation risks are tilted toward
the higher side in coming months, but extensive government intervention is likely to keep inflation
at around the 5.50% level.

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 Table of Contents
Sl Topic Name Page
.
1 Bangladesh economic outlook 7-8

2 Statistical information regarding GDP, GNP, Growth 9-16

rate, per capita income, inflation rate, unemployment,
macroeconomic trend
3 Export-Import 17

4 Major agricultural and industrial products 18-20

5 Investment scenario 21-27

6 Problems and prospects 28-29

7 References 30

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Bangladesh Economic Outlook

November 12, 2019

The economy appears to be in good shape so far in FY 2020, which started in July. In July–October,
remittances increased by around one-fifth in U.S. dollar terms compared to the same period a year earlier. In
addition, wages of low-skilled workers rose annually by over 6% in July–September and bank lending
increased by over 12% in the same period. These developments indicate healthy domestic demand. They also
likely mitigated the impact of the introduction of a wider VAT regime and a one-third increase in natural gas
prices in July. However, in July–October, exports of goods decreased by nearly 7% in annual terms, largely
due to a drop in ready-made garment exports. In other news, two large Saudi energy companies announced in
October they will soon build an LNG facility in Bangladesh worth approximately USD 3 billion, boding well
for fixed investment.

Bangladesh Economic Growth

Going forward, the economy is likely to slow, partly due to flagging global trade. In addition, downside risks
include threats from a banking system under strain from a high number of non-performing loans and a high
vulnerability to natural disasters such as flooding and cyclones. Our panelists expect GDP to expand 7.6% in
FY 2020, which is unchanged from last month’s forecast, and 7.4% in FY 2021.

Bangladesh Economy Data

2013 2014 2015 2016 2017

Population (million) 157 158 160 162 163

GDP per capita (USD) 956 1,093 1,22 1,372 1,521

0

GDP (USD bn) 150 173 195 222 248

Economic Growth (GDP, annual 6.0 6.1 6.6 7.1 7.3

variation in %)

Industrial Production (annual variation 12.0 8.7 11.8 13.1 14.6

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 2013 2014 2015 2016 2017

in %)

Fiscal Balance (% of GDP) -3.4 -3.1 -4.0 -3.4 -3.3

Public Debt (% of GDP) 35.8 35.3 33.7 33.3 32.5

Money (annual variation in %) 16.7 16.1 12.4 16.4 10.9

Inflation Rate (CPI, annual variation in 7.3 6.1 6.1 5.0 5.8
%, eop)

Inflation Rate (CPI, annual variation in 7.5 7.0 6.2 5.5 5.7
%)

Exchange Rate (vs USD) -   -   -   -   -  

Exchange Rate (vs USD, aop) -   -   -   -   -  

Current Account (% of GDP) 1.6 0.8 1.5 1.9 -0.5

Current Account Balance (USD bn) 2.4 1.4 2.9 4.3 -1.3

Trade Balance (USD billion) - -6.8 -7.0 -6.5 -9.5

10.3

Exports (USD billion) 23.8 29.8 30.7 33.4 34.0

Imports (USD billion) 34.1 36.6 37.7 39.9 43.5

Exports (annual variation in %) 4.0 25.3 3.1 8.9 1.7

Imports (annual variation in %) -4.0 7.3 3.0 5.9 9.0

International Reserves (USD) 18.0 22.4 27.9 32.1 33.2

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 2013 2014 2015 2016 2017

External Debt (% of GDP) 21.3 19.1 18.6 17.5 19.0

Statistical information regarding GDP, GNP, Growth rate, per capita

income, inflation rate, unemployment, macroeconomic trend
Bangladesh earns nearly $7 billion a year by exporting textile products, mainly to Europe and the
United States. This is about 70 percent of total export earnings of the country. The RMG industry
has around 4,000 units across the country. It employs around 2.5 million workers, 90 percent of
whom are poor women. Whenever the country is criticized for its high level of corruption and
confrontational politics, its garment industry is held up as a success story.

Gross Domestic Product: Gross Domestic Product (GDP) is the broadest quantitative measure
of a nation's total economic activity. More specifically, GDP represents the monetary value of all
goods and services produced within a nation's geographic borders over a specified period of
time.

Bangladesh GDP growth rate: Bangladesh is considered as a developing economy. Yet, almost
one-third of Bangladesh’s 150m people live in extreme poverty. In the last decade, the country
has recorded GDP growth rates above 5 percent due to development of microcredit and garment
industry. Although three fifths of Bangladeshis are employed in the agriculture sector, three
quarters of exports revenues come from producing ready-made garments. The biggest obstacles
to sustainable development in Bangladesh are overpopulation, poor infrastructure, corruption,
political instability and a slow implementation of economic reforms. This page provides -
Bangladesh GDP Growth Rate - actual values, historical data, forecast, chart, statistics,
economic calendar and news. Bangladesh GDP Growth Rate - actual data, historical chart and
calendar of releases - was last updated on December of 2019.

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GDP Growth Rate in Bangladesh is expected to be 7.20 percent by the end of this quarter,
according to Trading Economics global macro models and analysts’ expectations. In the long-
term, the Bangladesh GDP Growth Rate is projected to trend around 6.80 percent in 2020,
according to our econometric models.

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Gross national product: Gross national product (GNP) is an estimate of total value of all the
final products and services turned out in a given period by the means of production owned by a
country's residents. GNP is commonly calculated by taking the sum of personal consumption
expenditures, private domestic investment, government expenditure, net exports and any income
earned by residents from overseas investments, minus income earned within the domestic
economy by foreign residents. Net exports represent the difference between what a country
exports minus any imports of goods and services.

Bangladesh’s Gross National Product was reported at 315.341 USD bn in Dec 2019. This
records an increase from the previous number of 286.545 USD bn for Dec 2018.
Bangladesh’s Gross National Product data is updated yearly, averaging 47.650 USD bn
from Dec 1973 to 2019, with 47 observations. The data reached an all-time high of
315.341 USD bn in 2019 and a record low of 8.108 USD bn in 1973. Bangladesh’s Gross
National Product data remains active status in CEIC and is reported by CEIC Data. The
data is categorized under World Trend Plus’s Global Economic Monitor – Table: Gross
National Product: USD: Annual: Asia. CEIC shifts year-end for annual Gross National
Product and converts it into USD. The Bangladesh Bureau of Statistics provides Gross
National Product in local currency. Bangladesh Bank average market exchange rate is
used for currency conversions. Gross National Product is reported in annual frequency,
ending in June of each year. Gross National Product prior to 2006 is sourced from the
World Bank

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Gross National Product in Bangladesh increased to 11550.46 BDT Billion in 2019 from
10690.64 BDT Billion in 2018. Gross National Product in Bangladesh averaged 5889.35 BDT
Billion from 2003 until 2019, reaching an all-time high of 11550.46 BDT Billion in 2019 and a
record low of 2483.46 BDT Billion in 2003.

Gross National Product in Bangladesh is expected to be 10573.51 BDT Billion by the end of this
quarter, according to Trading Economics global macro models and analysts’ expectations. In the
long-term, the Bangladesh Gross National Product is projected to trend around 13108.73 BDT
Billion in 2020, according to our econometric models.

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The per capita income in Bangladesh will increase by 11.39 percent to $1,466 this fiscal year,
according to the Bangladesh Bureau of Statistics. It was $1,316 in the last fiscal year, Planning
Minister AHM Mustafa Kamal said at a meeting of the National Economic Council yesterday.
Alongside an increase in the gross domestic product (GDP), the per capita income also soared, said
officials of the BBS, adding that they estimated the GDP growth to be 7.05 percent by the end of
this fiscal year in June.

The Gross National Income (GNI) was Tk 18,314,994 million ($2,343 million) this fiscal year
when the population was 159.9 million. This will be seen as a giant leap for the country towards
becoming a middle-income nation after being bracketed with low-income nations for decades.
Bangladesh was elevated from the low-income status to lower middle income nation last year,
meeting the World Bank's requirements comfortably. The development came against the backdrop
of the country achieving higher per capital income amid a stable economic growth.

The WB used 2014 data to determine this year's ranking. On July 1 each year, the WB revises the
income classification of the world's economies based on the GNI per capita of the previous year.
Bangladesh's per capita income was $1,080 in 2014, higher than the Washington-based lender's set
threshold of $1,045

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Bangladesh inflation rate eased to 5.47 percent in October of 2019 from 5.54 percent in the
previous month. It was the lowest inflation since February, as non-food products cost slowed
(5.45 percent vs 5.92 percent in September). In contrast, food prices advanced faster (5.49
percent vs 5.30 percent). The inflation rates for rural and urban areas were 5.36 percent and 5.67
percent, compared with September's figures of 5.41 percent and 5.80 percent respectively. On a
monthly basis, consumer prices rose 0.51 percent, following a 1.85 percent in the previous
month. Inflation Rate in Bangladesh averaged 6.51 percent from 1994 until 2019, reaching an all
time high of 16 percent in September of 2011 and a record low of -0.03 percent in December of
1996.

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Inflation Rate in Bangladesh is expected to be 5.70 percent by the end of this quarter, according
to Trading Economics global macro models and analysts’ expectations. Looking forward, we
estimate Inflation Rate in Bangladesh to stand at 6.00 in 12 months’ time. In the long-term, the
Bangladesh Inflation Rate is projected to trend around 6.50 percent in 2020, according to our
econometric models.

Unemployment Rate in Bangladesh increased to 4.30 percent in 2018 from 4.20 percent in 2017.
Unemployment Rate in Bangladesh averaged 3.86 percent from 1991 until 2018, reaching an all-
time high of 5.10 percent in 1997 and a record low of 2.20 percent in 1991

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Unemployment Rate in Bangladesh is expected to be 4.30 percent by the end of this quarter,
according to Trading Economics global macro models and analysts’ expectations. In the long-
term, the Bangladesh Unemployment Rate is projected to trend around 4.20 percent in 2020,
according to our econometric models.

Bangladesh - Current economic trends:

As a first effort to begin to build on the foundation laid in the last five years, the government of
Bangladesh has clarified its priorities - population control and increased food grain production.
Economic growth in FY78 will be largely influenced by good performance in agriculture and
industry. Planned on-going programs with an eye to cost effectiveness should provide the
foundation for sustained agricultural growth. Improvement in the world demand for raw jute and
for jute goods indicate that short-term expansion of jute output would benefit Bangladesh. Greater
functional autonomy should improve performance of public enterprises. Efficient use of available
resources, both domestic and foreign, to maximize growth and the social benefits thereby accrued.
It is essential that the next Five-Year Plan address the critical needs of the rural poor. A significant
amount of external assistance will be required together with government efforts to increase exports
and mobilization of domestic resources and to use foreign exchange prudently. Volume II addresses
Population growth and planning.

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Export Import

Export means goods and services which are produced in another country. Import means buying
foreign goods and government of a country. Those exports bring money into the country, which
increases the exporting nations GDP. When a country imports good, it buys them from foreign
producers. When exports are greater than imports, net exports are positive. When exports are
lower than imports are negative. An export license is a document issued by the appropriate
licensing agency after which an exporter is allowed to transport his product in a foreign market.
The license is only issued after a careful review of the facts surrounding the given export
transaction. Here some things need to have register export import business in order -getting
started, set up, obtain a pan card for the business, open a current account, get the import export
code issued, obtaining the registration cum membership certificate. Bangladesh imports mostly
fuel, capital goods and foodstuff originating in china, India, the EU and Kuwait.

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Major Agricultural and Industrial Products

The industrialized production of livestock, poultry, fish and crops is called industrial agriculture.
Industrial agriculture includes techno scientific, economic, and political methods. The major goal
of industrialized agriculture is to steadily increase each crops yield ---the amount of food
produced per unit of land. Industrialized Agriculture uses heavy equipment and large amounts of
financial capital, fossil fuels, water, commercial inorganic fertilizers and pesticides to produce
single crop. The Agriculture forestry, fishing and hunting sector comprises establishments
primarily engaged in growing crops, raising animals, harvesting timber and harvesting fish and
other animals from a farm, ranch or their natural habitats. Most agricultural product in
Bangladesh is characterized by traditional subsistence farming. Bangladesh produces a variety of
agricultural products such as rice, wheat, corn, legumes, fruits, vegetables, chicken meat, fish,
and seafood. Rice is considered the main staple in the Bangladesh diet. The major industries in
Bangladesh Agriculture Approximately 30% of Bangladesh GDP. 60% of the Bangladeshis work
in this sector. It primarily producing jute, river, tea, tomato etc.

A rising middle class (estimated at over 30 million) has fueled demand for high quality
agriculture products. According to the Bangladesh Bureau of Statistics (BBS), for FY 2014-15
(provisional estimate), crops, livestock, fisheries, and forest products account for about 16
percent of Bangladesh’s total GDP and employs approximately 47 percent of the total
population. Most agricultural production in Bangladesh is characterized by traditional
subsistence farming. Bangladesh produces a variety of agricultural products such as rice, wheat,
corn, legumes, fruits, vegetables, chicken meat, fish, and seafood. Rice is considered the main
staple in the Bangladeshi diet. Less arable land and limited natural resources increase the
importance of developing new agricultural technologies, such as salt tolerant or submergence
tolerant seed varieties, to help increase productivity for future demand needs. Strikes, floods,
cyclones, and drought also can affect agricultural productivity levels and incomes.

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Although Bangladesh imports bulk commodities such as wheat and rice, there are niche segment
opportunities for high-value agricultural product imports, particularly in more affluent urban
centers like Dhaka and Chittagong. Strong consumer demand exists for imported fresh fruits, as
well as processed food products.

Leading Sub-Sectors

The processed food industry accounts for approximately 12.3 percent of all manufacturing
production value and employs six percent of the manufacturing labor force. The industry
employs two percent of the country’s total labor force and its share of GDP was seven percent in
2012-13. The sector is dominated by small and medium-sized enterprises strongly linked to
local production. There are nearly 246 medium-sized food manufacturing enterprises in the
country processing baked goods, confectionery items, fruits and vegetables, cereals, dairy goods,
fruit juices, and various other foods and beverages.

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The food and beverage sector in Bangladesh has an estimated annual value of gross domestic
production of $8.3 billion.

Opportunities

Agriculture equipment and technology; Agriculture inputs, including feed, seeds, and fertilizer;
Dairy processing equipment; Fish processing equipment; Canning equipment and technology;
Agriculture infrastructure consulting services and solutions, including silos and cold storage
facilities.

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INVESTMENT SCENARIO OF BANGLADESH

Investment in Bangladesh has been taking a steep rise, with sustained growth from 2009 and
policy regimes becoming more conducive. Since time immemorial, Bangladesh has harbored the
spirit of free enterprise and innovative entrepreneurship, which is well-knit into the economic
fabric of Bangladesh.

'Vision 2021' envisions a Bangladesh which “will be a middle-income country where poverty
will be drastically reduced, where our citizens will be able to meet every basic need, and where
development will be on fast track, with ever-increasing rates of inclusive growth." The key
milestones of Vision 2021.

INVESTMENT CLIMATE OF BANGLADESH

The government of Bangladesh has given highest priority to augmenting private investment in
Bangladesh. The incentives offered are considered as the most competitive in South Asia.

There is no restriction on the amount of share of investment. Foreign investors are eligible to
take advantage of a wide range of generous tax concessions and other fiscal incentives and
facilities.

Investment in Bangladesh is secure vis-à-vis nationalization and expropriation. To facilitate

investment Bangladesh became a signatory to the Multilateral Investment Guarantee Agency
(MIGA) of the World Bank Group, Overseas Private Investment Corporation (OPIC) of the US,
and International Centre for Settlement of Investment Disputes (ICSID), as well as a member of
World Association of Investment Promotion Agencies (WAIPA), World Intellectual Property
Organization (WIPO) and World Trade Organization (WTO).

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General packages of incentives for investment include:

* Reduced import duty on machinery and spares

** Bonded warehousing facility for export-oriented industries

* 90 percent loans against letters of credit (by banks)

* Funds for export promotion

* Export credit guarantee scheme

* Domestic market sales up to 20 percent allowed to export-oriented companies outside EPZ

(relevant duties apply)

* Cash incentives and export subsidies granted on the FOB values ranging from 5 percent to 20
percent on selected products

* Corporate tax holiday from 5 to 7 years in certain areas and sectors

* Tax exemption on capital gains from the transfer of shares of public limited companies listed
with a stock exchange

Achievement of Bangladesh in terms of receiving FDI

n 2013, Bangladesh received FDI of USD 1,599 million which is 24 percent higher than 2012.
Since 2009, FDI has been growing by 20 percent on average.

The following table depicts the trends of FDI inflow in Bangladesh:

During the first six months of 2014, USD 829.43 million of FDI has flowed in to Bangladesh.

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REFORMS INITIATIVES

Many reform initiatives have been taken by this government to augment investment and further
ease conducting business in Bangladesh. For the purpose of business regulation simplification 18
reforms have been made; in the area of legal/policy amendments and new laws 12 reforms have
been made; and in private-public joint efforts four efforts have been made. Some of the efforts
have been detailed below:

Automation of investor registration processes at BOI

BOI introduced an automated registration system for both local and foreign investors in
Bangladesh in December 2010. The online platform enables potential investors to complete the
entire registration process, including submitting the application, attaching relevant documents,
tracking the registration status, providing interactive feedback and seeking approval, without
visiting the BOI office or using an intermediary.

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As a result, the average time taken to register has reduced from 42 days to 12 days in 2012 to less
than a week in recent times), while the average cost to register has reduced by 81.8 percent.
Automation of registration services has yielded USD 16 million in total aggregated compliance cost
savings (USD 0.14 million in direct compliance cost savings and USD 15.9 million in indirect
compliance cost savings). Recent surveys show that 18 percent of industrial projects are now being
registered within 10 days. This has benefited all industrial projects (local, joint-venture and foreign)
that obtained registrations post-automation.

Automation of export permit issuance at DEPZ

Bangladesh Export Processing Zone Association introduced an automated export permit issuance
process at the Dhaka Export Processing Zone in June 2010. Once the export permit application gets
submitted, the system automatically notifies the applicant through a return email and/or an SMS as
soon as it is approved. As a result, the average time to issue an export permit has reduced by 33
percent. Number of interfaces between companies and DEPZ authority has reduced to zero from
four in obtaining export permits. As of 2011, 77 firms used the automated export permit system

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which is 91 percent of firms operating in DEPZ, and a total 48,871 export permits were issued by
BEPZA for that year. Automated export permit issuance system is expected to save USD 1.9
million in direct compliance cost in four years. Beneficiaries of the system include all active firms
currently operating in DEPZ.

Automation of Company Registration with RJSC&F

Registrar of Joint Stock Companies & Firms introduced online name clearance in February 2009
and automated business registration in March 2009. The automated system allows businesses to
complete the entire registration process online. The number of visits has reduced by 40 percent
since initiation. Furthermore, there has been a 26 percent reduction in time required for registration
(23 days in 2009 to 17 days in 2012) and 98 percent reduction in time required to obtain name
clearance (nine days in 2009 to 1.58 hours in 2012). This will benefit all businesses (public, private,
partnerships, societies and associations) that obtained registrations post-automation and all future
business registration applicants.

Cash subsidy claim process simplification of Bangladesh Bank

Following Core Group recommendations, Bangladesh Bank passed a circular in September 2009
for streamlining the cash subsidy claim procedure and reducing the time taken by firms to obtain
their cash subsidies. Manufacturers of export products get cash subsidies on domestic raw materials
used as inputs. Subsidy rates vary from sector to sector between 5 to 20 percent of the value of the
local inputs. Prior to this circular, firms' claims were only disbursed after a full audit by Bangladesh
Bank and subject to fund availability. Smaller firms were suffering more from uncertainty in
disbursement time before the circular and are thus benefited the most. As of 2011, firms were
getting 70 percent of a claim on the same day after a preliminary verification by commercial banks.
The remaining 30 percent is received within 15 days. The steps to obtain a cash subsidy have
reduced from seven to two. Simplification of cash subsidy claim procedure was expected to save
USD 20.7 million in direct compliance cost within 4 years of initiation.

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Bonded warehouse licensing simplification

The Customs Bond Commissionerate (an agency under the purview of National Board of Revenue)
implemented the bonded warehouse licensing simplification process, with support from BICF. In
June 2008, the government issued a set of rules to streamline the licensing process and reduce
uncertainty and discretion. The new rules stipulated a reduction in required documents, set a time
limit for issuance of the license and omitted the requirement to get approval from an additional
agency. Furthermore, through the Business Initiative Leading Development - BUILD (a platform
for public-private dialogue), the bonded warehouse licensing process was further simplified in July
2012. The overall time taken to obtain a bonded warehouse license reduced by 53.5 percent by
2013. Contrary to popular perception investment in Bangladesh has been steadily raising since
2009, FDI in particular. In 2013, annual growth was a robust 24 percent – the highest ever in the
history of the country. In the years to come this will increase even further. Bangladesh as an
investment destination of prime value is an idea whose time has certainly come.

ECONOMY OF BANGLADESH AT A GLANCE

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Per capita income : 1192 USD

GDP : 130 billion USD

GDP growth : 6.2 percent p.a

FDI inflow : 1.6 billion USD (CY 2013)

Export : 30.1 billion USD (FY 2014)

Import : 37.18 billion USD (FY 2014)

FOREX Reserve : 21.59 billion USD (Nov, 2014)

Problems & prospects

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Today, there are six major macroeconomic challenges for Bangladesh's economy. First,
accelerating economic growth and maintaining high economic growth over the coming years will
remain a big challenge. Two major drivers of economic growth in Bangladesh have been the
readymade garments exports and remittances. The dividends from these drivers of growth are likely
to decline in the future. There is a need to find new drivers of growth through diversification of the
economy and developing productive capacities. In these contexts, stimulating private investment in
diversified economic sectors and ensuring efficient public investment remain uphill tasks.

Second, containing inflation is a critical challenge. Bangladesh has been able to avoid high
inflationary pressure since 2011. The overall inflation rate has remained below 7 percent. In recent
years, the inflation rate is less than 6 percent. However, there are three concerns with respect to the
inflation situation in Bangladesh: (i) the overall inflation rate hides the sudden and intermittent
steep rise in food prices, especially the price of rice, which affects the poor people; (ii) as the
overall inflation rate is a weighted sum of the food and non-food inflation, there are concerns that
the non-food inflation in Bangladesh is underestimated due to inappropriate representation of non-
food items and their prices in the calculation of inflation rates; (iii) the overall low inflation rate at
the national level may not reflect the true picture of the high inflationary pressure faced by different
low-income groups as their consumption baskets and related prices are likely to be different from
the national averages. Given these concerns, containing inflationary pressure for low-income
people will remain a challenge for Bangladesh in the wake of further growth acceleration.

Third, the management of the exchange rate is a crucial area of concern. Though, for long,
Bangladesh has been able to maintain a relatively stable exchange rate regime, the exchange rate in
recent times is alleged to be over-valued. In recent years, while Bangladesh's major competitors in
the global market, such as China, Vietnam, India, and Sri Lanka, have experienced significant
depreciation of their currencies against US dollar, Bangladeshi taka remained quite stable. The
analysis of the real effective exchange rate in Bangladesh also shows a misaligned exchange rate
regime which, together with high tariff rates on imports, lead to significant anti-export bias. In
other words, the current exchange rate and trade policies are not favorable for rapid export
expansion in Bangladesh. However, one important point to note here that, while the importance of
the correction of anti-export bias for export promotion and diversification cannot be undermined,

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such correction alone cannot be sufficient to trigger "auto" large supply response in terms of
expanding export volumes and diversifying the export basket. A number of supply-side constraints,
in terms of weak infrastructure, the high cost of capital, lack of access to credit, and lack of skilled
human resources can prevent local producers from expanding exports, and the lack of an enabling
business environment can strangle entrepreneurship and innovation. Therefore, the policy options
and support measures for exports are much more difficult and involved than the mere correction of
anti-export bias.

Fourth, the surged balance-of-payment deficit in recent years remains a big concern for the stability
of the macro economy. Over the past two years, the economy has been witnessing high growth rate
in imports, while the growth rates in exports and remittances have been subdued and unstable,
which has led to widening trade deficit and current account deficit. Though the current volume of
foreign reserve can meet the import demand of around five months, the volume of the foreign
reserve has been on a declining trend since the financial year of 2017. Given the projections of high
import demand for construction and industrial raw materials in the coming days on the one hand
and unstable global trading environment, thus creating uncertainties for both export and remittance
growth, on the other hand, managing a stable balance-of-payment regime will remain a big
challenge for the Bangladesh economy. One important lesson Bangladesh can learn from the
experiences of the successful countries from southeast Asia is that attracting large scale foreign
direct investment (FDI) can ease the pressure on balance-of-payment. Bangladesh is yet to be
successful in attracting large-scale FDI. The amount of annual FDI inflow in recent years is only
around 2.5 billion USD while the country needs more than USD 10 billion FDI annually to achieve
many of its development goals. Therefore, enabling the environment for ensuring large-scale FDI
remains a critical task ahead.

References

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https://www.export.gov/article?id=Bangladesh-Agricultural-Sector

http://www.bbs.gov.bd/site/page/dc2bc6ce-7080-48b3-9a04-73cec782d0df/Gross-Domestic-
Product-(GDP)

https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=BD

https://tradingeconomics.com/bangladesh/gdp-per-capita

https://www.cabdirect.org/cabdirect/abstract/20036793787

http://lbamcl.com/wp-content/uploads/2019/05/Bangladesh-Economic-Review-2019-Q1.pdf

https://www.focus-economics.com/countries/bangladesh

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