Bangladesh Economic Review 2020

CHAPTER ONE
MACROECONOMIC SITUATION

Over the past decade Bangladesh’s economic growth has steadily increased from 6 percent to
8 percent. The global novel Coronavirus (COVID-19) pandemic has adversely affected the
economy of Bangladesh. According to the provisional estimates of the Bangladesh Bureau of
Statistics (BBS), GDP growth in FY2019-20 stood at 5.24 percent, compared to 8.15 percent
in the previous fiscal year. Growth in export and import in FY2019-20 is negative. However,
remittance inflows grew by 10.87 percent has reduced the current account deficit compared
to the previous fiscal year. At the same time, the increase in capital and financial account
inflows has led to a surplus in the overall balance of payments. As a result, the foreign
exchange reserves have increased significantly. As of June 30, 2020 the foreign exchange
reserve stood at US$ 36.04 billion, the highest ever. During this period, a marginal
depreciation in exchange rate of Taka with the US dollar is being observed. To keep the
country's economy afloat in the face of the ongoing Coronavirus pandemic, extra spending on
healthcare, emergency humanitarian assistance has been materialised. The government has
already announced a financial package of abut Tk. 1.2 lakh crore for economic recovery.
Some of the notable activities of this package are: create special funds for export oriented
industries; provide working capital facilities to the affected industry and service sector
organisations; provide working capital facilities to small (including cottage industries) and
medium industrial enterprises; increase the benefits of the Export Development Fund;
increase coverage of social security; direct cash transfer to targeted people, formulate
various funds for the agricultural sector. As well as financial incentives, various activities
including policy support such as reduction of import duty on COVID-19 related products,
policy support to increase liquidity in the banking sector has been provided. As a result of
these actions taken by the government, the economy is expected to turn around.
Global Economy that the global economic growth would
contract sharply by 4.4 percent in 2020
The coronavirus (COVID-19), which has
downgrading from -3.0 percent projection
emerged as a global pandemic, poses a major
made in April 2020, WEO.
risk to the global economy. Protecting lives
and allowing health care systems to cope with According to IMF, the baseline scenario,
have required quarantine, isolation, lockdown which assumes that social distancing will
etc. which in turn have severely limited continue into 2021 but will fade over time as
economic activity. As a result of the vaccine coverage will expand everywhere by
pandemic, the global economy is anticipated the end of 2022. The global economy is
to contract in a much worse way than during projected to grow by 5.2 percent in 2021 as
the 2008-2009 financial crises. In the World the economic activity normalises, helped by
Economic Outlook (WEO) October 2020, policy support.
International Monetary Fund (IMF) projected
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In advanced economies, growth is expected to weaker than in the projection made by April
slow to -5.8 percent in 2020. The rapid and 2020 WEO. Prospects for China are much
widespread impact of COVID-19 and the stronger than for most other countries in this
consequent stagnation of economic activity group, with the economy projected to grow
have led to a slowdown in growth. The by about 8.2 percent in 2021. Activity
economic growth of almost all countries of normalised faster than expected after most of
advanced economies will be negative, most the country reopened in early April, and
notably: the United States (–4.3%), Germany second quarter GDP registered a positive
(–6.0%), France (–9.8%), Italy (–10.6%), and surprise on the back of strong policy support
Spain (–12.8%), Japan (–5.3%) and the and resilient exports. All emerging market
United Kingdom (–9.8%). In parts of Europe, and developing economy regions are
the outbreak has been as severe as in China’s expected to contract this year, including
Hubei province. Although essential to contain notably emerging Asia, where large
the virus, lockdowns and restrictions on economies, such as India and Indonesia,
mobility are extracting a sizable toll on continue to try to bring the pandemic under
economic activity. Huge population has control. Table 1.1 highlights the growth
become unemployed. Adverse confidence scenario of the world.
effects are likely to further weigh on
Table 1.1: Overview of World Output
economic prospects.
Growth Projections
Among emerging markets and developing (Percent Changes)
economies, all countries face a health crisis, Economic Projection Difference from
Area Outlook, Outlook, April,
severe external demand shock: tightening in October, 2020 2020
global financial conditions, and a plunge in 2019 2020 2021 2020 2021
World Output 2.8 -4.4 5.2 -1.1 -0.5
commodity prices, which will have a severe Advanced 1.7 -5.8 3.9 0.3 -0.6
impact on economic activity in commodity Economies
USA 2.2 -4.3 3.1 1.6 -1.6
exporters. In addition, oil exporting countries Euro Area 1.3 -8.3 5.2 -0.8 0.5
will face problems as the falling of oil prices. Germany 0.6 -6.0 4.2 1.0 -1.0
France 1.5 -9.8 6.0 -2.6 1.5
Average petroleum spot prices per barrel are Japan 0.7 -5.3 2.3 --0.1 -0.7
projected at US$ 41 in 2020 and US$ 43.8 Emerging 3.7 -3.3 6.0 -2.1 -0.5
Market and
in 2021, higher than in the April and June Developing
forecasts. Oil futures curves indicate that Economics
Emerging 5.5 -1.7 8.0 -2.7 -1.0
prices are expected to rise thereafter toward and
US$ 48, some 25 percent below the 2019 Developing
Asia
average. Nonfuel commodity prices are China 6.1 1.9 8.2 0.7 1.0
expected to rise faster than assumed in April India 4.2 -10.3 8.8 -12.2 1.4
ASEAN-5 4.9 -3.4 6.2 -2.8 -1.5
and June. Source: World Economic Outlook, October 2020
Note: ASEAN-5: Indonesia, Malaysia, Philippines, Thailand and
Overall, the group of emerging market and Vietnams.

developing economies, growth is forecast at A combination of factors: continuing spread

-3.3 percent in 2020, 2.1 percentage points of the pandemic and overwhelmed health care
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systems, greater importance of severely
affected sectors, such as tourism; and greater
dependence on external finance, including
remittances. Turning the global economy
around in 2021 depends on how quickly the
pandemic can be brought under control and
build consumer and investor confidence can
be built. To this end, countries are
implementing various financial and stimulus
programmes to revive the world economy by
improving the health system and providing
public health services.
Macroeconomic Situation: Bangladesh,
2019-20
Economic Growth
Economic growth slowed to 5.24 percent in
FY2019-20 (July, 2019 to June, 2020),
according to the provisional estimates of
BBS, which is the lowest since FY2008-09.
Following the trend of achieving economic
growth, the growth exceeded 6 percent in
FY2010-11, 7 percent in FY2015-16 and 8
percent in FY2018-19. Although the
economic situation of the country was normal
in the first eight months of FY2019-20, the
COVID-19 pandemic has had a huge negative
impact on the economy of Bangladesh since
March, 2020.
Per capita GDP and GNI
According to the provisional estimate, the
volume of GDP at current market prices
reached Tk. 27,96,378 crore in FY2019-20,
which was Tk. 25,42,483 crore in FY2018-
19. In nominal term GDP growth is 9.99
percent. As per the final estimate, per capita
GDP in FY2018-19 was US$ 1,828 up by
US$ 153 from the previous fiscal year.
Likewise, per capita national income
increased to US$ 1,909 in FY2018-19, up by
US$ 158 from FY2017-18. The per capita
GDP stands US$ 1,970 in FY2019-20, up by
US$ 142 from the previous fiscal year, while
the per capita national income stood at US$
2,064, up by US$ 155 in the previous fiscal
year.
Sectoral Growth
According to the provisional estimate of BBS,
the growth of agriculture sector has slowed to
3.11 percent in the FY2019-20, from 3.92
percent in FY2018-19. During the same
period, industry sector grew by 6.48 percent,
which was 12.68 percent in the previous
fiscal year. The service sector grew by 5.32
percent in FY2019-20 compared to 6.78
percent in the previous fiscal year.
Within the broad agriculture sector, the
growth rate of agriculture and forestry sector
decelerated from 3.15 percent to 2.08 percent
in FY2019-20. In addition, growth in fishing
sector slowed slightly to 6.10 percent from
6.21 percent of previous fiscal year. The
contribution of the broad agricultural sector to
the GDP stood at 13.35 percent in FY2019-20
against 13.65 percent in the previous fiscal
year.
Of the 4 sectors of the broad industrial sector,
growth in the manufacturing (large and
medium scale and small scale) has slowed
down significantly. According to provisional
estimate, the growth of large and medium
enterprises and small scale industries in GDP
stood at 5.47 and 7.78 percent respectively in
FY2019-20, compared to 14.84 percent and
10.95 percent in the previous fiscal year. The
growth of the construction sector stood at
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9.06 percent as compared to 10.25 percent
over the previous fiscal year. Overall, the
contribution of the broad industry sector
stood at 35.36 percent in FY2019-20, as
compared to 35.00 percent in the previous
fiscal year.
Among the broad service sector, wholesale
and retail trade; hotels and restaurants;
transport, storage and communication;
financial intermediations; real estate and
renting and business activities; health and
social works etc. have decelerated
significantly (about 1 to 3.1 percent)
compared to FY2018-19. The contribution of
broad service sector to the GDP stood at 51.30
percent in FY2019-20, which was 51.35
percent in the previous fiscal year.
Consumption Expenditure
Over more than a decade, consumption as
domestic demand has been around 74-81
percent of GDP. In FY2007-08, consumption
expenditure was 80.8 percent of GDP, of
which government expenditure was 5.2
percent and private sector expenditure was
75.6 percent. This rate has been declining
since the following year and in FY2018-19,
consumption stood at 74.98 percent of GDP.
Consumption for FY2019-20 has been
estimated to 74.69 percent of GDP.
Savings and Investment
During FY2019-20, domestic savings
increased to 25.31 percent of GDP, which was
25.02 percent in the previous year. Likewise,
national savings as percent of GDP increased
to 30.11 percent in FY2019-20 percent from
29.50 percent of the previous fiscal year. The
investment has slowed down to 10.63 percent
in FY2019-20 as compared to 14.19 percent
in the previous fiscal year, due to the slight
stagnation in the economy in the last four
months of the fiscal year caused by COVID-19
pandemic. However, both public and private
investment as a percentage of GDP has
accelerated slightly compared to the previous
fiscal year. Gross investment stood at 31.75
percent in FY2019-20, which was 31.57
percent of the previous fiscal year. Of this,
public investment and private investment
accounted for 8.12 percent and 23.63 percent
of GDP, respectively, up from 8.03 percent of
GDP and 23.54 percent of GDP in the
previous fiscal year, respectively.
Inflation
In FY2018-19, the average CPI inflation was
5.48 percent, remained within the target
(5.50%) and 0.30 percent lower than the
previous fiscal year. Food inflation for
FY2018-19 decreased to 5.51 percent from
7.13 percent in FY2017-18, while non-food
inflation increased to 5.43 percent from 3.73
percent of previous fiscal year.
In FY2019-20, the inflation rate stood at 5.65
percent, which is slightly higher than the
target (5.50%). In this case, food inflation
increased to 5.56 percent and non-food
inflation stood at 5.85 percent. The
Coronavirus (COVID-19) has slowed global
economic activity and reduced inflation
globally. However, the pandemic could ignite
world food production and disruption of
supply chain. Therefore, food inflation is
likely to increase in the coming months.
Revenue Mobilisation
The revenue mobilisation target was set at Tk.
3,48,069 crore (12.41% of GDP) in FY2019-
20. Of them, revenue receipt from NBR
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sources was marked at Tk. 3,00,500 crore
(10.71% of GDP), tax revenue from non-NBR
sources at Tk. 12,567 crore (0.45% of GDP)
and non-tax revenue at Tk. 35,002 crore
(1.25% of GDP).
As per provisional data of Integrated Budget
and Accounting System (iBAS++), total
revenue mobilisation stood at Tk. 2,62,813
crore , which is 4.34 percent higher than the
revenue mobilisation of previous fiscal year,
achieving 75.51 percent of the target.
Tax revenues received from NBR sources was
Tk. 2,14,848 crore or 1.73 percent lower than
the previous fiscal year achieving 71.50
percent of revised target. Revenue on taxes
from income and profit witnessed the growth
at 11.97 percent compared to the previous
fiscal year. The Value Added Tax (VAT),
import duty and supplementary duties (SD)
are contracted to 5.98 percent, 2.31 percent
and 15.35 percent respectively compared to
the previous fiscal year.
Tax revenue receipt form non-NBR sources
during the period was Tk. 5,944 crore, which
is 19.04 percent lower the revenue earning of
previous fiscal year achieving 61.91 percent
of the revised budget target. On the other
hand, revenue mobilisation from non-tax
sources stood at Tk. 42,022 crore, up by
62.11 percent over the of previous fiscal year
achieving 120.06 percent of the revised
budget target. Non-tax revenue increased
sharply as per the decision to deposit surplus
money of autonomous, semi-autonomous,
state-owned and public non-financial
corporation to government treasury.
In order to augment revenue mobilisation as
well as to create a comfortable trade
environment along with transparency and
accountability, NBR has been implementing a
wide range of reform initiatives. Included
among are:
 The VAT Act and its rules have been
simplified for automated and transparent
environment
 Online VAT registration has been
compulsory and software has been
prepared to provide online submission.
 Using Electronic Cash Register/Point of
Sale (ECR/POS) software has been
compulsory replaced with Electronic
Fiscal Devise (EFD) and such machines
have been installed in 100 business
installations on a pilot basis.
 Software is mandatory for companies
with annual turnover of more than Tk. 5
crore.
Government Expenditure
According to the revised budget, the total
expenditure target for FY2019-20 has been
set at Tk. 5,01,577 crore, which is 17.88
percent of GDP. Of this, operating
expenditure is Tk. 2,95,280 crore (10.52% of
GDP), food account is Tk. 654 crore, loans
and advances are Tk. 3,298 crore and
development expenditure is Tk. 2,02,349
crore (7.21% of GDP). Annual Development
Plan (ADP) allocation is Tk. 1,92,921 crore
(6.88% of GDP) of the development budget.
As per the provisional estimates of iBAS ++,
the total expenditure in FY2019-20 was Tk.
3,98,490 crore, of which operating
expenditure was Tk. 2,40,255 crore and
development expenditure was Tk. 1,48,330
crore. The operating and development
expenditures are 87.40 percent and 73.30
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percent of the target respectively. As per the
IMED sources, ADP expenditure in FY2019-
20 was Tk. 1,61,857 crore, achieving 80.45
percent of revised ADP target.
A new Budget and Accounting Classification
System (BACS) has been introduced from
FY2018-19 with a view to upgrading
government financial management to an
international standard. In addition to civil
administration, defense and railway budget
and accounting process have been brought
under the iBAS ++ software developed by
local experts. In order to make this system
more dynamic, activities will be undertaken
for consolidation and integration among
them. To simplify the development project
fund release process, project directors have
been given the full authority in FY2019-20 to
utilise project fund without seeking approval
from any authority.
Budget Balance and Financing
In the revised budget of FY2019-20, budget
deficit has been estimated at Tk. 1,53,508
crore which is 5.47 percent of GDP. Of this
deficit, Tk. 52,709 crore (1.88% of GDP) will
be financed from external sources (including
foreign grant) and Tk. 97,345 crore (3.47% of
GDP) will be backed by domestic sources. To
finance the deficit in the domestic sector,
there is a plan to get Tk. 82,421 crore from
the bank system and the remaining Tk.
14,924 crore from the non-bank sector. As
per iBAS++ provisional estimate the budget
deficit excluding grants stand at Tk. 1,35,677
crore, which is 4.8 percent of GDP.
Prioritise the Allocation of Revised ADP,
2019-20.
All the ministries/divisions will identify the
ongoing projects of the revised Annual
Development Programme for FY2019-20 into
three groups with a view to allocating
additional funds to the priority sectors of the
government to address the situation caused by
the outbreak of novel coronavirus. These are:
'High Priority', 'Medium Priority' and 'Low
Priority' projects. Implementation of high
priority projects will continue. In the case of
medium priority projects, money will be
spent in all the items of the project in which it
is inevitable to use the money. Lower priority
projects will need prior consent from Finance
Division in the case of expenditures.
However, projects of the Ministry of Health
and Family Welfare and the Ministry of
Agriculture will be excluded.
Stimulus Packages
To address the crisis resulting from the
outbreak of COVID-19 and overcome its
potential adverse effects on the economy,
Hon’ble Prime Minister Sheikh Hasina has
guided the formulation of an overall program
with short, medium, and long-term targets.
This program has four main strategic aspects.
 The first strategy is to increase
government spending. In this respect,
priority will be given to creating jobs and
discouraging luxury spending.
 The second strategy is to provide low-
interest credit facilities through the
banking system to industries and business
enterprises to revive economic activities
and increase the competitiveness of
entrepreneurs at home and abroad.
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 The third strategy is to increase the scope
of the government's social security
programmes to protect the ultra-poor and
the low-income groups that have suddenly
become unemployed as well as the people
engaged in informal sectors.
 The fourth and last strategy is to increase
money supply in the market. However,
this strategy is being implemented with
utmost caution so that the negative effects
of inflation can be controlled.
The government has already announced a
fiscal and stimulus package of Tk. 1, 20, 953
crore, which is 4.3 percent of GDP, to
facilitate additional expenditure in the
healthcare sector, emergency humanitarian
assistance, and the overall economic recovery
program. Some of the key features of the
program is highlighted below:
 A fund of Tk. 5,000 crore was provided
for the purpose of ensuring continuation
of payments of salaries and allowances of
the workers of export-oriented industries
at a service charge of only 2 percent. This
initiative helped protect jobs of a large
number of workers in this sector.
 The working capital loan facility of Tk.
33,000 crore is being given at an interest
rate of 9 percent to the affected industries
and service sector companies to continue
their business operation. Of this 9 percent,
4.5 percent will be paid by the borrowers
and the remaining 4.5 percent by the
government. As a result, large industrial
and service sectors have been able to
continue their business activities during
COVID-19.
 The working capital loan facility of Tk.
20,000 crore is being given at an interest
rate of 9 percent to the affected micro,
small and medium enterprises including
the cottage industries to continue their
business operation. Of this 9 percent, 5
percent will be paid by the government as
subsidy and the remaining 4 percent by
the borrowers. As a result, micro, small
and medium enterprises including the
cottage industries and service sector have
been able to continue their business
activities during COVID-19.
 The government has increased facilities
under the Export Development Fun (EDF)
and Pre-Shipment Credit Refinance
Scheme of Bangladesh Bank.
 A total of 5 lakh metric tonnes of rice and
1 lakh metric tonnes of wheat have been
distributed free of cost across the country
as humanitarian aid for the poor people
who have suddenly become jobless due to
the coronavirus outbreak. Again, rice is
being sold among the low-income people
at Tk. 10 per kg. As a result of all these
measures, marginalised people did not
face any food shortage and the chances of
their falling below the poverty line were
reduced.
 Initiatives have been taken to increase the
coverage of social safety net programmes
to protect the ultra-poor in the country
from being jobless and prevent their loss
of income due to the coronavirus
outbreak. An amount of Tk. 2,500 in cash
each is being disbursed directly to 50 lakh
selected beneficiary families from the
treasury to their bank or mobile accounts
across the country.
 Under the social safety net programmes,
the coverage of old age allowances and
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the widow and divorcee women
allowances in 100-ultra-poor Upazilas has
been increased to cent percent. As a
result, the total number of beneficiaries
under these two allowances, including
that under the disability allowance, has
been increased by a total of 11 lakh, and
their livelihood has become easier during
the COVID-19 outbreak.
 Initiatives have been taken to build houses
for all the homeless people on the
occasion of the birth centenary of the
Father of the Nation Bangabandhu Sheikh
Mujibur Rahman. As a result, the poor
will no longer have to be homeless.
 Of the activities undertaken to recover the
economy in the aftermath of the
coronavirus outbreak, the most prioritised
one is to ensure continuation of
agricultural production. To ensure food
security for the people of the country,
several important initiatives have been
taken to maintain agricultural production
at the usual level. In order to ensure that
the farmers get fair price of their produce
(paddy) and keep the price of rice stable
in the market, the target of procuring rice
in the current Irri-Boro season has been
expanded by 2 lakh metric tons. An
amount of Tk. 3,200 crore are being
allocated as an incentive to promote farm
mechanisation. The amount of
agricultural subsidy has been increased to
Tk. 9,500 crore. An agricultural refinance
scheme of Tk. 5,000 crore is being
formulated to ensure easy loans of
affected farmers. In addition, a
refinancing scheme of Tk. 3,000 crore has
been created for low-income professional
farmers/ small traders. All these initiatives
will be helpful for agriculture in the
country and will assist our farmers.
 Allocation has been made to
Karmasangsthan Bank, Prabasikallyan
Bank, Palli Sanchay Bank and Palli
Karmasahayak Foundation for the
purpose of providing loans at a low
interest rate to expatriate workers, trained
youth and unemployed youth for starting
business and self-employment. For this
purpose, the government will provide a
capital of Tk. 500 crore to each of these
four institutions so that they can disburse
low-interest loans to suitable
entrepreneurs under specific programs. As
a result, self-employment opportunities
have been created for poor rural farmers,
expatriate workers, trained youth and
unemployed youth in the agriculture
sector and in agro-related production and
services, small business, small and
cottage industries, etc.
 The interest collection against disbursed
loans by all commercial banks for the
month of April and May has been
postponed.
 To encourage banks to disburse loans to
micro, cottage and small enterprises,
Bangladesh Bank has introduced a credit
risk guarantee scheme of Tk. 2000 crore.
Monetary Policy and Monetary
Management
The monetary policy stance and monetary
programme for FY2019-20 have been drawn
up with dual objective of maintaining price
stability and supporting economic growth in
the tune with government’s strategies and
goals for sustainable growth. Monetary policy
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remained accommodative during FY2019-20.
The monetary programme is based on the 8.2
percent real GDP growth and 5.5 percent CPI
inflation ceiling targets declared for FY2019-
20 in the national budget. Bangladesh Bank’s
annual monetary programme made adequate
room for money and credit growth for
attaining the targeted nominal GDP growth.
With a view to ensure the adequate liquidity
in the financial system to tackle the
impending financial crisis stemming the from
the COVID-19 pandemic, Bangladesh Bank
reduced the repo rate from 6 percent to 5.75
percent effective from 24 March 2020. The
repo rate was further reduced to 5.25 percent
effective from 12 April 2020. The CRR was
initially reduced from 5 percent to 4.5 percent
(daily-basis) and from 5.5 percent to 5
percent (bi-weekly basis), with a further
reduction to 3.5 percent and 4 percent,
respectively, from 15 April 2020. Bangladesh
Bank has also raised the advance-deposit ratio
(ADR) and investment-deposit ratio (IDR) by
2 percent to 87 percent and 92 percent
respectively to facilitate credit to the private
sector and improve liquidity in the banking
system.
Money and Credit
The projected growth of monetary aggregate
and credit programme set for FY2019-20 (end
June, 2020) are: broad money (M2) at 12.5
percent, reserve money (RM) at 12.0 percent,
domestic credit 15.9 percent and credit to
private sector 14.8 percent.
Broad money growth accelerated in FY2018-
19 from 9.24 percent a year earlier to 9.88
percent, but fall short of the FY2018-19
monetary programme target of 12 percent.
The year-on-year growth of broad money at
the end of June 2020 stood at 12.64 percent,
which is slightly higher than the target. At the
same period, reserve money has grown by
15.56 percent, which is 3.56 percent than the
target. This growth is mainly due to the net
domestic assets (NDA). At the end of June
2020, the growth of NFA and NDA are 14.82
percent and 48.30 percent respectively.
At the end of FY2018-19, the domestic credit
increased by 12.26 percent as against 14.70
percent in the previous fiscal year. At the end
of FY2019-20, domestic credit increased by
13.58 percent, which is slightly higher than
the growth rate of the previous fiscal year
(12.26%). At the end of FY2019-20, the
growth of private sector credit stood at 8.61
percent, compared to 11.32 percent in the
previous fiscal year. The net credit to the
government increased by 55.51 percent at the
end of June, 2020 compared to 19.37 percent
increase in same period of previous fiscal
year.
Interest Rate
Initiatives have been taken to rationalise the
interest/profit rate of loans/investments with a
view to creating an industry and business
friendly environment for the industrial,
business and service organsations.
Bangladesh Bank issued a circular on 24
February 2020 fixing the interest rate on
loans at a maximum of 9 percent (except
credit card) which was to be effective from 1
April 2020. As part of this, the interest rate
on deposits is being implemented at 6 percent
from February 2020.
The weighted average lending rate of
commercial banks was 9.95 percent at the end
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of June 2018, decreased to 9.58 percent at end
of June 2019 and further decreased
significantly to 7.95 percent. On the other
hand, the deposit rate was 5.50 percent at the
end of June 2018 which decreased slightly to
5.43 percent at the end of June 2019 and
further decreased to 5.06 percent at the end of
June 2020. The weighted average interest rate
spread on loans and deposits has come down
from 4.15 percent at the end of June 2019 to
2.89 percent at the end of June 2020.
Capital Market
Volatility has been observed in the price
index of the Dhaka Stock Exchange (DSE)
since the beginning of FY2019-20. In
addition, trading was closed in April and May
2020 due to the novel Coronavirus pandemic.
The DSE Broad Index (DSEx) decreased by
26.42 percent from 5,421.62 points at the end
of June 2019 to 3,989.09 points at the end of
June 2020. The number of listed securities
(including mutual funds and debenture) of
Dhaka Stock Exchange (DSE) stood at 589 in
June 2020. Total market capitalisation of all
listed securities was Tk. 3,99,816.40 crore in
June 2019, which decreased to Tk.
3,11,967.00 crore in June 2020, representing
an increase of to 21.97 percent.
Chattogram Stock Exchange (CSE) All Share
Price Index declined by 31.87 percent from
13,332.56 points at the end of June 2020 from
16,634.21 in June 2019. The number of listed
securities (including mutual funds and bonds)
of CSE is 324 in June 2020. Market
capitalisation of CSE at the end of June 2020
stood at Tk. 2,44,756.71 crore, which was
25.68 percent lower than the market
capitalisation of Tk. 3,29,330.28 at the end of
FY2018-19. Various initiatives have been
taken by the government to maintain the
stability of the capital market. In order to
achieve the long term goal of sustainable
development of the capital market by
providing liquidity, a special fund of Tk. 200
crore has been set up for each bank to invest
in the capital market and its investment policy
has also been formulated.
Export
World trade has slowed since the beginning
of 2020 due to trade disputes between the
United States and China, falling oil prices and
declining revenue in the oil producing
countries. The economic activities came to
stagnant due to the COVID-19 pandemic,
which also affected country’s foreign trade.
The total export earnings for FY2018-19
stood at US$ 40,535.04 million, which is
10.55 percent higher than the previous fiscal
year. Total export earnings in FY201-20
stood at US$ 33,674.09 million, down 16.93
percent from the previous fiscal year. On
month-to-month basis, export growth in
March 2020 declined by 18.21 percent over
the same month of the previous fiscal year
due to the coronavirus outbreak. Export
earnings fell 82.86 percent to US$ 520.01
million in April 2020. However, the situations
has been improving since May 21020. In June
2020, export earnings declined by only 2.50
percent compared to the same month of the
previous fiscal year.
Some of the products that have been able to
sustain growth during this period are: frozen
fish (17.99%), pharmaceuticals (4.49%),
handicraft (2.86%), raw jute and jute products
(8.10%). On the other hand, growth in the
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Bangladesh Economic Review 2020
readymade garments sector slowed to 18.12
percent.
Even though exports are expected to decline
further in the coming months due to the
global pandemic, hopefully, many foreign
buyers have postponed their purchases but
have not canceled them. As a result, the
export sector is expected to rebound once the
Corona crisis is resolved. The government
has taken several steps as an incentive in the
export sector. The size of the Export
Development Fund (EDF) has already been
increased from US$ 350 million to US$ 500
million and interest rates have been fixed at 2
percent.
Import
The total import payment (C&F) for FY2018-
19 stood at 59,914.70 million, up 1.78 percent
from the previous fiscal year. Imports in
FY2019-20 stood at US$ 54,784.70 million,
down 8.56 percent over the previous fiscal
year. Of this, imports of food grains and
consumer goods increased by 7.76 percent
and 5.38 percent, respectively, while imports
of intermediate commodities and capital
goods declined by 5.05 percent and 23.92
percent respectively.
Overseas Employment and Remittance
Adverse condition in the overseas
employments is prevailing due to the global
epidemic. The continued fall of fuel price has
also limited economic activity in the oil
producing Middle East countries. The total
manpower export in FY2018-19 was 6.93
lakh, which is 21.26 percent less than the
previous fiscal year. In the first nine months
of FY2019-20 (July-March, 2020), the
country's labor force exports stood at 5.31
lakh people, which is 2.73 percent more than
the same period of the previous fiscal year.
From April 2020 to June 2020, manpower
exports were virtually closed.
In FY2018-19, remittance inflows increased
by 9.60 percent over the previous fiscal year
to US$ 16,419.63 million. In FY2019-20,
remittance inflows stood at US$ 18,205.01
million, an increase of 10.87 percent over the
previous fiscal year. The lion's share of
remittances comes from Middle Eastern
countries. In this regard, during FY2019-20,
Saudi Arabia (22.06%), the United Arab
Emirates (13.58%) and the United States
(13.21%) topped the list. In this regard,
remittance from United States has shown a
significant growth.
Balance of Payments (BoP)
The trade deficit widened significantly to
US$ 17,861 million in FY 2019-20 from US$
15,835 million in the previous fiscal year.
During this period, the current account
balance decreases as remittance flows
increase. The current account deficit stood at
US$ 4,849 million, compared to US$ 5,102
million in the same period of the previous
fiscal year.
On the other hand, capital and financial
account inflow increased US$ 7,914 million
in FY2019-20 from 6,146 million a year
earlier. As a result, the overall balance of
payments increased from US$ 179 million in
FY2018-19 to US$ 3,655 million in FY2019-
20.
Foreign Exchange Reserve
The surplus in the overall balance helped to
maintain the foreign exchange reserve up. On
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Bangladesh Economic Review 2020
30 June 2020, the foreign exchange reserves
reached US$ 36.04 billion. On 30 June 2019,
the foreign exchange reserve was US$ 32.72
billion. It is noteworthy that remittances has
recently gone up to a record US$ 40 billion.
Exchange Rate
In FY2018-19, the weighted average
exchange rate of the taka against the US
dollar deprecated by 2.35 percent compared
to the previous fiscal year and stood at Tk.
84.03. In FY2019-20, the interbank weighted
average exchange rate of taka against US$
depreciated by 0.9 percent and stood at 84.60.
Short and Medium Term Prospect of
Bangladesh Economy
The Medium Term Macroeconomic
Framework (MTMF), 2020-21 to 2022-23, has
been formulated taking into account the
recent dynamics of the global economy and
the impacts on the domestic sector. The
global economy is at great risk due to COVID-
19, the impact of which is expected to be even
greater than the 2008-09 recession.
Countries are implementing incentive
packages to address the unintended effects of
the coronavirus on global growth and
commodity markets. The Government of
Bangladesh has also announced various
policy assistance including incentives to deal
with the situation and overcome it.
The projections in the MTMF have been
formulated based on the following
assumptions.
 The effects of COVID-19 will be brought
under control in the second half of 2020.
 As in previous fiscal years, the main
driving force for growth in supply side
will be the service and industry sectors
and government investment and
consumption expenditure in terms of
demand side.
 Due to the Coronavirus situation, export
earnings and remittance inflows may
decline in the coming months.
 Lockdown could disrupt ongoing
development activities in the power,
energy, communications and transport
sectors, which could hamper high growth.
 The resilience of economy as well as the
massive incentive measures taken by the
government to address the economic
impact of the Coronavirus outbreak will
help to address that impact effectively.
 The current growth trend in the
agriculture sector will continue as a result
of incentives for 5 percent interest subsidy
in agriculture, ensuring timely supply of
agricultural inputs, various activities for
harvesting in the agricultural sector such
as: low interest loans and subsidy in
mechanisation agricultural input.
In the MTMF, GDP growth has been projected
to increase from 5.2 percent in FY2019-20 to
8.2 percent in FY2020-21. Investment is
expected to be between 33-36 percent of GDP
in the next three fiscal years. Of this,
investment in the public sector will be
between 8-9 percent of GDP and investment
in the private sector will be between 25-28
percent.
In the MTMF the projected revenue
mobilisation for FY2020-21 could reach 11.9
percent of GDP to 12.2 percent of GDP in
FY2022-23. The revised budget for FY2019-
20 has set a target of 17.9 percent of GDP,
which will be closer to the next three fiscal
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Bangladesh Economic Review 2020
years. In FY2019-20, the revised budget
deficit will expected to remain 5.5 percent of
GDP. The budget deficit could reach 6.0
percent of GDP in FY2020-21, due to
increased government spending aimed at
restoring the economy overcoming the effects
of COVID-19, which will fall to 5 percent of
GDP in the following years.
Inflation is projected at 5.5 percent in the
current FY2019-20, which is expected to
remain almost the same in the next three
fiscal years. The target is to keep the private
sector credit flow at 14.8 percent in FY 2019-
20, which is expected to increase gradually to
16.8 percent in FY2022-23.
Growth in remittances is projected at 5.0
percent in FY2019-20, which is projected to
be 10-15 percent in the next three fiscal years.
The possibility of a return to a strong position
in the export sector has been considered in the
medium term macroeconomic framework.
Besides, there is a domestic demand in the
economy of Bangladesh. So it is expected that
the development pace of the economy will be
continued. Table 1.2 highlights the projection
of key macroeconomic indicators during
FY2016-17 to FY2022-23.
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 Bangladesh Economic Review 2020

Table 1.2: Medium Term Macroeconomic Framework: Key Indicators

Indicators 2016-17 2017-18 2018-19 2019-20 2019-20 2020-21 2021-22 2022-23

Actual Budget Revised Projection
Budget
Real Sector
Real GDP growth (%) 7.3 7.9 8.2 8.2 5.2 8.2 8.3 8.4
CPI Inflation (%) 5.4 5.8 5.5 5.5 5.5 5.4 5.3 5.2
Investment (% GDP) 30.5 31.2 31.6 32.8 20.8 33.5 34.5 35.6
Private 23.1 23.3 23.5 24.2 12.7 25.3 26.6 27.7
Public 7.4 8.0 8.0 8.6 8.1 8.1 7.9 7.9
Fiscal Sector (% of GDP)
Total Revenue 10.2 9.6 9.9 13.1 12.4 11.9 12.1 12.2
Tax Revenue 9.0 8.6 8.9 11.8 11.2 10.9 11.0 11.1
Of which NBR Tax Revenue 8.7 8.3 8.6 11.3 10.7 10.4 10.5 10.6
Non-Tax Revenue 1.2 1.0 1.0 1.3 1.2 1.0 1.10 1.1
Public Expenditure 13.6 14.3 15.4 18.1 17.9 17.9 17.1 17.2
Of which ADP 4.3 5.3 5.8 7.0 6.9 6.5 6.5 6.5
Overall Balance -3.4 -4.7 -5.5 -5.0 -5.5 -6.0 -5.0 -5.0
Financing 3.4 4.7 5.5 5.0 5.5 6.0 5.0 5.0
Domestic Financing 0.7 1.2 1.3 2.4 2.0 2.5 2.1 2.1
External Financing (net) 2.8 3.5 3.9 2.7 3.5 3.5 2.9 2.9
Money and Credit (Year-on-year % change)
Domestic Credit 11.2 14.7 12.3 14.5 18.3 17.2 18.5 18.3
Credit to the Private sector 15.7 16.9 11.3 16.6 14.8 16.7 16.8 16.8
Broad Money 10.9 9.2 9.9 12.5 13.0 12.5 12.5 12.5
External Sector (% Change)
Export, f.o.b 1.2 5.8 10.5 12.0 -10.0 15.0 10.8 11
Import, f.o.b 9.0 25.2 1.8 10.0 -10.0 10.0 8.0 7
Remittance -14.5 17.3 9.6 13.0 5.0 15.0 10.0 10
Current Account Balance
(% GDP) -0.3 -3.4 -2.2 -1.3 -0.6 0.1 0.4 0.8
Gross Foreign Exchange
Reserves (Billion US$) 33.4 32.9 32.7 38.4 35.0 40.2 45.0 50.0
Forex. Reserve in the month of
Import 8.0 6.2 6.0 6.2 8.4 8.8 9.1 9.5
Memorandum Item
GDP at current market prices
(Billion Tk.) 19758 22505 25425 28859 28057 31718 35834 40456
Source: Finance Division, Ministry of Finance.

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