Course No- 207

ECONOMY OF BANGLADESH

SUMMARY OF MACROECONOMIC PERFORMANCE

SINCE INDEPENDENCE

Submitted to :

Mrs. Nayeema Nusrat Chowdhury

Associate Professor
Department of Economics
University of Dhaka

Submitted by:

Sarabul Islam Sajbir

Roll: FR-037-124
B.S.S Honors 11th Batch 3rd Semester
Department of Economics
University of Dhaka

Date of Submission: 03.04.2018

 CONTENTS
Name Page
Introduction 1
GDP Growth Rate 2
Per Capita GDP 3
Population 4
Per Capita GNI 5
Inflation Rate 6
Unemployment Rate 7

Remittance 8

Life Expectancy 9

USD Exchange Rate 10

Imports ( % of GDP ) 11

Exports ( % of GDP ) 12

Restriction Behind the Economic Growth of Bangladesh 13

Economic Governance 14

Global Integration
Infrastructure Development 15

Human Capital Development

Financial Sector Performance 16

Commendable Acheivements 17
 INTRODUCTION

Bangladesh is one of the fastest growing economies in the world right now.
By funneling enough resources and support, Bangladesh can become major
role player for global economy in the future. From the times of Ibn Batuta
when he described the region having immense fertility resembling a water
soaked garden, to the times of Goldman Sachs who termed Bangladesh's
economy as 'The Miracle of East' , the potential for Bangladesh's economy in
undeniable.

The people of Bangladesh took progressive steps towards socialism followed

by the policies taken by Bangabandhu Sheikh Mujibur Rahman, after the end
of the sanguinary liberation war. After the military uprising, political stability
of Bangladesh was falling. In only ten (10) years, government changed five
(5) times. That's how the economy of Bangladesh took a significant turn
towards free-market economy. Following the evolution to a democratic rule
in the early of 1990s, Bangladesh economy experienced a macroeconomic
immovability. Massive GDP per capita growth has made Bangladesh secure a
spot in the 'Next Eleven' which is a group of countries who have the highest
potential of becoming one of the largest economies in the world.

All of this praiseworthy achievements were possible only because of the

unimaginable macroeconomic performance since independence.
 GDP GROWTH RATE

GDP ( Gross Domestic Product ) is the total value of all final goods & services
produced in an economy for a given period of time. GDP is one of the most if
not the most important variables of an economy. GDP is a potential
equipment to fight against poverty. Higher GDP growth rate indicates higher
visible reduction in poverty where negative growth rate may increase
poverty.

YEAR GDP GROWTH

RATE
1990 5.6%
2000 5.3%
2008 6.0%
2009 5.0%
2010 5.6%
2011 6.5%
2012 6.5%
2013 6.0%
2014 6.1%
2015 6.6%
2016 7.1%
(Source: World Bank)

From the table, we can say that GDP growth rate is stable over a period of
time which is very appreciable. The Bangladesh Economy didn't experience
acceleration during the 2000s in comparison to the 1990s . But in last 10
years, the growth rate has increased quite a bit. Specially in 2016, our
growth rate finally crossed 7%. Therefore, we can say that GDP growth rate
of Bangladesh has been in a rising trend.
 PER CAPITA GDP
Per capita means per person. Per capita GDP stands for average income per
person in a country. The per capita GDP is especially useful when comparing
one country with another, because it shows the relative performance of the
countries. GDP per capita is a measure of the total output of a country that
takes the GDP & divides it by the number of people in the country.
(Investopedia )

Fiscal Year Per Capita Per Capita GDP ($)

GDP ($)
1800
2009-10 780 1600
2010-11 860 1400 1544
1200 1385
2011-12 880 1236
1000
2012-13 976 1110
800 976
880
2013-14 1110 860
600 780
2014-15 1236 400
200
2015-16 1385
0
2016-17 1544

(Source: Bangladesh Bureau of

Statistics)
From the above figure, we can see that the "Per Capita GDP" has almost
doubled from FY2009-10 to FY2016-17 increasing outstandingly in every
fiscal year gradually. A significant increase in this macro-economic variable
surely proves that the economy of Bangladesh is starting to evolve . Per
capita GDP/income is one of the three components of Human Development
Index ( HDI). Bangladesh is regarded as "Medium Human Development"
country especially for a huge increase in per capita income.
 POPULATION
Bangladesh is a diminutive nation with a vast population where population
of the country has increased significantly in large amount. A chart of
approximate amount of population is given below:

Population (Million )
180
161 163
160 149
140
120
120 105
100
80.5
80 67 Population (Million )

60 50
38
40
20
0
1950 1960 1970 1980 1990 2000 2010 2015 2016

(Source: United Nations )

UN estimated that the population of Bangladesh would be approximately 202
million within 2050. From the table above, we can easily come to the
decision that the population of our country increased quite a lot since
independence.
Although the population growth rate increased significantly from 1980s to
2000, growth rate is coming down & calculated 1.6% in 2015 which is a
quite a good turn-around for a highly populated country like Bangladesh.
27% of the total population (2009 est.) live in urban areas which is very
unusual for a growing economy . This also implies that most of the employed
persons (42.7%) are directly or indirectly related to agriculture.
 PER CAPITA GNI
GNI ( Gross National Income ) is the total value of all final goods & services
produced in by the nationals for a given period of time. Per capita GNI is the
Gross National Income ( GNI ) divided by population of that specific year.
"GNI is the sum of value added by all resident producers plus any product
taxes not included in the valuation of output plus net receipts of primary
income from abroad" - UNICEF.

Fiscal Year Per Capita GNI at

PPP(International $)
2009-10 843
2010-11 928
2011-12 955
2012-13 1054
2013-14 1184
2014-15 1316
2015-16 1465
2016-17 1610
(Source: Bangladesh Bureau of Statistics)

Analyzing the data found from the source, we can definitely acknowledge
that like per capita GDP. per capita GNI is increasing at a wonder rate. We
can see that, in past 10 years, the Per Capita GNI has got almost doubled
from $843 to $1610. If this growth continues, economy of Bangladesh will
boost its way to become a strong one. This macroeconomic variable is surely
giving a clear indication that economy of Bangladesh is in increasing trend
for sure.
 INFLATION RATE
Inflation rate is one of the key macroeconomic variables that helps to gain
proper knowledge about an economy. Central banks attempt to limit
inflation and avoid deflation in order to keep the economy running
smoothly. "Inflation is the rate at which the general level of prices for
goods & services is rising and, consequently, the purchasing power of
currency is falling. " - Investopedia

Inflation Rate
12
10.32 10.33
10 9.07 8.94 8.78
8.27 8.15
8 7.63
7.03 6.77
6.34
6 5.19 5.43
Inflation Rate
4 3.37 3.53
2.42 2.39
1.93
2

0
199519961997199819992000200120022003200420052006200720082009201020112012

(Source: World Bank)

Figure shows that, inflation rate have fluctuated quite a bit in few decades.
From 1995 to 1996, inflation rate decreased significantly. From 2000-2003,
inflation rate was quite low in compared to the inflation rates of other years.
In 2001, annual inflation rate came down to its lowest point of below
2%(1.93%), mainly due to lower prices of food items.But it has been on an
upward path since 2007. It again touches two digits in 2011 due to the
results of rising international prices of fertilizers,fuel and foods,higher
business cost due to corruption and malgovernance.
 UNEMPLOYMENT RATE

Unemployment rate is another important macroeconomic variable that

allows us to gather an idea about the employment rate of the total labor
force of a country. Unemployment rate is basically is the measure of
unemployment in a country. During periods of recession, an economy
usually experiences a relatively high unemployment rate.

Unemployment Rate
6.00%
5.10% 5.00%
5.00% 4.50% 4.26% 4.24%
4.03%
Unemployment Rate

4.00% 4.53% 4.47%

4.26% 4.07%
3.00%
3.05% Unemployment Rate
2.00%
2.20%
1.00%

0.00%
1991 1997 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Source: World Bank)

From the above time series data, we can easily analyze the unemployment
rate of Bangladesh for the past 2 decades. In 1991, the unemployment rate
was quite low ( 2.2% ). But it creased to nearly 5% within 6 years. But a
significant scenario it seen here. The unemployment rate is stable around
4% for the last 8 years, which is a good indicator for an economy.
Unemployment rate can be moved down by opening new businesses.
Economic governance should play a vital part in this regard.
 REMITTANCE
A transfer of funds or a payment made by an entity from any foreign nation
to his/her own nation is called remittance. It is one of the largest financial
inflows to developing countries. Money sent by migrants competes with
global aid . As a huge amount of citizens of our country work abroad, it's
obvious that the remittance we get from the migrants are one of the
blessings for our economy.

Remittance ( in Million $ )

2015 15366.72

2010 10836.03

2005 4630.06

2000 1958.11 Remittance ( in Million $ )

1994 1150.88

1985 502.47

1976 18.76

0 5000 10000 15000 20000

Source: World Bank

From the horizontal bar diagram showing the yearly remittance gives us a
clear knowledge about the flow of the remittance in Bangladesh. Without
any doubt, this is one of the greatest achievements of our economy as we
can see, the amount of remittance for last 40 years has changed
unbelievably from 18.76 Million USD to 15,366.72 Million USD. From 2005 to
2010, the amount of remittance have got doubled. The amount of
remittance is increasing tremendously which is a blessing for our economy.
 LIFE EXPECTANCY
Life expectancy is also an interesting indicator that gives comprehensible
suggestion about the average living years which can give clear idea about
achieving basic needs of the mass population. As Bangladesh is a small
country with large population, it's quite impossible for the government to
ensure every person's basic needs as the per capita income is not that high
in terms of other countries. Here is the table from where we can compare
the yearly data of life expectancy of Bangladesh:

YEAR LIFE EXPECTANCY (Year)

1990 58.4
2000 65.3
2008 69.3
2009 69.8
2010 70.2
2011 70.7
2012 71.1
2013 71.5
2014 71.9
2015 72.2
Source: World Bank

From the table, we can see a stable but very significant uptrend of life
expectancy of Bangladesh. In last 25 years, the life expectancy has increased
from 58.4 years to 72.2 years, almost 14 years , which is outstanding from
the prospective of our country.
 USD EXCHANGE RATE
US dollar exchange rate is also an important indicator where we can
compare the value of one currency in terms of the most common currency -
USD. One country's currency in terms of another country's currency is called
exchange rate. USD exchange rate plays a vital role in a country's level of
trade, which is critical to every free market economy in the world.

BDT IN TERMS OF USD

90
78.15
80
68.65
70 63.92
60
52.14
50
40.27
40 35.8 BDT IN TERMS OF USD
31
30
20 16.1

10
0
1980 1985 1990 1995 2000 2005 2008 2015

Source: CIA World Factbook

From the figure, we can scrutinize that Bangladesh taka in terms of USD has
been increasing quite alarmingly every decade. In 1980s, 1 USD was
equivalent to only 16.1 taka wherease it's almost 85 taka today . this is really
unsual & alarming for our economy. This also indicate that our country's
performance in international trade in not up to the mark since
independence.
 IMPORTS OF GOODS & SERVICES

Import of goods & services of a country measured in % of GDP is an

important variable to understand the size of the economy and it also gives a
clear indicator about a country's ability to meet her needs. Bangladesh
needs to import way more than the amount of exports because of the
scarcity of necessary commodities.

YEAR IMPORTS ( % of GDP)

1990 13.1
2000 17.0
2008 25.0
2009 23.2
2010 21.8
2011 27.5
2012 27.9
2013 26.8
2014 25.5
2015 24.7
2016 21.3
Source: World Bank

From the table above, we can see that a significant percantage of GDP is
used for imports . Imports increased quite a bit in last three decades
approximately from 13% to maximum of 28% of the GDP. Although the rate
has been on the declining side from 2013 till now which is a good news for
us.
 EXPORTS OF GOODS & SERVICES

Exports of goods & services of a country measured in % of GDP is a great

indicator that helps to gain knowledge about productivity of the country as
well as efficiency. Bangladesh being a small & growing economy based
country, our export level in terms of GDP is not enough but Bangladesh has
a huge prospect in this regard as Bangladesh is one of the top countries
exporting ready-made garments, jutes, flozen fishes etc.

YEAR EXPORTS ( % of GDP)

1990 5.1
2000 12.3
2008 17.7
2009 16.9
2010 16.0
2011 19.9
2012 20.2
2013 19.5
2014 19.0
2015 17.3
2016 16.6
Source: World Bank

From the table, we can understand that exports ( % of GDP) has increaing by
approximately 5% to 16.6 % within 3 decades. Although it's on a decling side
from 2012 which we need to solve quickly by creating incentives for the new
exporters.
 RESTRICTION BEHIND THE ECONOMIC GROWTH
IN BANGLADESH

Although Bangladesh is having a commendable economic growth, there are

some restrictions that the economy has to face in Bangladesh in day to day
life. These restrictions are given below:

➢ Policy & institution to enhance global collaboration

➢ Weakness in policies
➢ Quality of financial institutions is below average
➢ Quality of Economic governance is low
➢ Regulatory and administrative disruption
➢ Lack of market discipline due to lack of proper law
➢ Political connection
➢ Political and economic connection
➢ Financial intermediation is poor
➢ Excess government intervention
➢ Operational and managarial inefficiency
➢ No stable condition for investment
➢ Lack of maintenance
 ECONOMIC GOVERNANCE

Economic governance refers to the nature and practice of economic

management, regulation and development. Versatile government
initiatives-including policies, regulations, rules, blueprint, and
implementation of open infrastructure, provision of public goods & services-
that influence private sector growth .
A very alarming issue regarding the uptrend of the economy of Bangladesh
is the poor economic performance. Problems faced in economic governance
of Bangladesh are given below:

❖ Problem of endemic corruption :

Our economic governance is pretty much corrupted in every sector. This
really hampers our economic growth. Bangladesh is ranked 143th among all
the countries scoring only 28 points out of 100 on the 2017 Corruption
Perceptions Index reported by Transparency International. Corruption index
in Bangladesh averaged 20.94 points from 1996 to 2017, reaching an all time
high of 28 points in 2017 and a record low of 4 points in 2001.
❖ Breakdown of law & order :
Breaking down of law such as robbing, extortion, widespread corruption of
police & lower court decreases public confidence on the enforcement of the
rule of law and order. It discourages investment and this will decrease long
run growth rate.
❖ Regulatory environment and cost of doing business :
There is no business friendly environment here due to bureaucratic
complexity. This increases the cost of doing business. Not only the cost of
doing business arises, but also the opportunity cost of a businessman's time.
According to World Bank's "Doing Business - 2003" database, the cost of
starting a business in Bangladesh is higher than China, India, Indonesia, Sri
Lanka, Thai Land and Vietnam.
 GLOBAL INTEGRATION

Global integration determines how much a country is globally incorporated

with another country. Global integration can involve the processes of
artifact standardization and technology development centralization. It's the
process by which a country combines different activities around the world.

Bangladesh's integration or combination with global economy is very near to

the ground. According to " KOF Globalization Index 2004 " , Bangladesh in
ranked 56th out of 62 countries & 112th out of 122 countries according to "
KOF Globalization Index 2012 "

INFRASTRUCTURE DEVELOPMENT

Infrastructure of a country includes transportation system, communication

system, method of business, power supplies such as power, electricity, gas
etc. This is an essential part of a growing economy.

According to reports of "Household Income and Expenditure Survey ( HIES )

- 2010" , 55.26% of 161 milion people have access to electricity. In urban
areas, 42% of the people have access to electricity wherease 90% of the
people of urban areas have access to electricity.

Poor condition of ports, poor construction of roads, lack of transportation

services hamper the infrastructural development mainly due to lack of
maintenance. These problems in infrastructure development discourages
investors to invest here which results in lower growth of economy.
 HUMAN CAPITAL DEVELOPMENT

Human capital development is imperative for its intrinsic worth as a

development objective in its own right, not only because of its influential
significance. To get a clear idea about the human capital development, there
are some indices from which HDI(Human Development Index) is the most
reliable index.
HDI was first launched in 1990. It is measured on the basis of three
components.
1. Long and healthy life
2. Access to education
3. Life standard
According to the Global Human Development Index (GDI) -2015,
Bangladesh ranked 139th out of 188 countries scoring 0.579. Bangladesh is
regarded as a "Medium Human Development" country. HDI points are given
below for different years since independence:

Year HDI Value

1990 0.386
2000 0.468
2010 0.545
2015 0.579

FINANCIAL SECTOR PERFORMANCE

Our financial sector is rather shallow & undeveloped that consists of banking
sector & emerging but still introductory phase capital market. Banking
segment consists of 53 private banks & 7 state owned banks . Non-banking
sectors consists of 35 financial institutions like financial companies ,
insurances etc. Banking sector is more developed than equity share
segment.
 COMMENDABLE ACHIEVEMENTS

Despite having many weaknesses, there are some positive features of the
economy of Bangladesh those can be regarded as commendable
achievements. A list of those are given below:

✓ Poverty reduction
✓ Stable macroeconomic condition
✓ Declining population growth
✓ Outstanding increase of remittance
✓ Lower initial expense to set a business
✓ Low inflation rate
✓ Low exposure rate due to low trade base
✓ Exports of readymade garments in abroad
✓ Stable unemployment rate
✓ Syncronized increase in life expectancy

Overall, the economy of Bangladesh is going towards the right direction as

maximum number of the important macroeconomic variables performanced
significantly since independence. Strong & improved regulatory board & good
economic governance can create immence positive impact on the macroeconomic
performances of our country .

THE END