Overview of the current Bangladesh Economy

Growth Rate of GDP

Figure: GDP Growth during Sixth Plan (%)

6.6
6.5

6.46

6.52

6.5

6.4
6.3
6.2

6.12

6.1

6.01

6
5.9
5.8
5.7
FY 11

FY 12

FY 13

FY 14

FY15

Source: BBS

The figure above shows GDP growth rate achieved year wise under the past Sixth Plan.
Sustained growth rate in annual real GDP over 6% during the plan was very laudable and the
ratio of actual GDP growth to the average planned GDP growth achieved in the Sixth Plan was
the highest among all Plans. Even more importantly, the GDP growth performance in the Sixth
Plan puts Bangladesh amongst the best performing nations globally as can be seen from the
figure above. Aided by a very successful population management policy, per capita GDP growth
moved up in every plan period, initially very slowly (1-2 percent range) but then accelerated to
around 5% average rate during the Sixth Plan. The GDP growth acceleration achieved during the
Sixth Plan has been instrumental in recently promoting Bangladesh to a lower-middle income
country, joining those with annual incomes of $1,046 to $4,125. Now our target is to become a
middle income country by 2018.

Figure 2: 6th FYP Growth Performance in International Context

(% p.a. 2011-2015)
World

2.8

OECD

1.7

Sub-Saharan Africa

4.6

Latin America

2.9

Developing countries

5.2

Thailand

3.3

Indonesia

5.8

India

5.5

China

7.8

Bangladesh

6.3
0

Source: World Bank Global Economic Prospects, 2013 and 2014

Investment
Growth in Investment (I) and National Saving (NS)

Figure: Saving, Investment Rates (% of GDP)

I/GDP

NS/GDP

30

Percent of GDP

25
20
15
10
5
0
1974

1980

1994

2000

Source: Bangladesh Bureau of Statistics

2010

2013

Fuelled by a rising rate of national savings, the rate of investment as percentage of GDP has been
following an upward trend, and at a rapid pace in the past two decades as depicted in the figure
above. The investment rate expanded from a low value of 10% of GDP in the 1970s to 28.9% in
FY2015. This accumulation of capital (capital deepening) has been the key driver of growth in
Bangladesh so far. The accumulation of capital has allowed the expansion of production
capacities in agriculture, in manufacturing, especially in the export-oriented garments sector, in
infrastructure as well as human development. These turn has enabled the higher growth of
economic activities in the country.

National Savings

Figure: Developments in Gross National Savings and Its Outlook under the 7th Plan
35.0
30.0

In percentages

25.0
20.0
15.0
10.0
5.0
0.0
FY11
FY12
FY13
-5.0
Gross National Savings/GDP

FY14

FY15

FY16

FY17

Gross Domestic Savings Growth (%)

FY18

FY19

FY20

Remittance Growth (%)

Source: BBS and Seventh Plan Projections

Bangladesh enjoys a respectable level of national savings rate in relation to GDP. This higher
national savings rate of 29% of GDP is primarily attributable to higher inflow of workers
remittances averaging more than 8% of GDP during the Sixth Plan period. Both National
Savings as a proportion of GDP and its growth rate has increased steadily over time although the
growth rate has experienced some fluctuation due to the volatility of the inflow of workers
remittance. If the current growth rates of the savings components are continued into the future,
the target for increasing the national savings rate to 32.0% of GDP should be attainable.

Remittance
Figure: Trend in Remittance Inflows FY1994-FY2015 (in Million US$)
18000
16000
14000
USD Million

12000
10000
8000
6000
4000
2000
0
FY95

FY97

FY99

FY01

FY03

FY05

FY07

FY09

FY11

FY13

FY15

Source: Bangladesh Bank

The figure above shows the trend in remittance inflow over time for the country. Bangladesh has
already established itself as a leading South Asian country in the export of factor services
(labour) through overseas employment to a wide range of countries, especially in the Middle
East. Remittance inflows grew slowly in the 1990s but then gained momentum in the 2000s. In
FY2014 official remittances stood at US$ 14.3 billion. This is now the second highest source of
foreign exchange earnings after RMG exports. Remittance flows are expected to stabilize and
grow further in the coming years as some of the problems relating to the legal status of
Bangladeshi migrants in Gulf countries are expected to be gradually resolved.

Inflation
Figure: Trend in Inflation during the Sixth Plan (%)

12

10.6
8.8

10
8

7.7

7.3

7.4

6.5

6
4
2
0
FY10

FY11

FY12

FY13

FY14

FY15

Source: BBS and Sixth Plan

The figure above shows the recent trends in the movement of the general price level in the
economy. Given existing economic conditions, Bangladeshs current level of inflation of 6.4%
can be seen as already being of moderate level and the economy has been very successful in
containing inflation in recent times. Following off-track performance during the first two years
of the plan, inflation rate surged to double digit in FY2012. Since then it has come down to
around 6.4% in FY15, a very commendable achievement given the adoption of prudent
macroeconomic policies by the central bank of the country.

Poverty
Fig: Estimated Poverty Reduction under the Sixth Plan Period (%)
35
30
25
20
15
10
5
0
2011

2012

2013
HCR-UPL

2014

2015

HCR-LPL

Source: GED estimates based on 2005-2010 HIES using growth elasticity of poverty

The figure above shows the projected decline in poverty (Head Count Ratio) during the Sixth
Plan which sought to reduce head-count poverty from 31.5 percent in 2010 to 22.5 percent by
2015. The incidence of poverty and extreme poverty both exhibit considerable reduction, with
faster progress in the reduction of extreme poor. The incidence of poverty falls to below 25
percent while that of extreme poverty declines to below 13 percent. Importantly, Bangladesh
achieves the MDG target of halving the incidence of poverty between 1990 and 2015. The 2015
estimated headcount poverty is below the MDG target of 28.5 percent for 2015.
Figure: Poverty Reduction Trends - Poverty and Extreme Poverty
60

56.7

50
40

51.0

48.9

34.4

34.3

41.1

30

40.0
31.5
25.1

20

24.8
17.6

10

12.9

0
1991/92

1995/96

2000

Poverty rate (%)

Source: Various HES and HIES, BBS

2005

2010

Extreme poverty rate (%)

2015 (est)

The figure shows the trends in poverty reduction for the country over time. Poverty and extreme
poverty have both declined substantially over the longer term. In particular, extreme poverty
decreased quite dramatically in both rural and urban areas since 1990. Additionally, the rate of
extreme poverty reduction has been faster in the decade of 2000s compared to the 1990s in both
rural and urban areas.
Figure: Projected Poverty Reduction for the 7th FYP
25
20
15
10
5
0
FY15

FY16

FY17

UPL

FY18

FY19

FY20

LPL

Source: GED estimation for 7th Plan

Based on the continuation and strengthening of the on-going poverty reduction strategy there
will be considerable achievements under the 7th FYP. The projected figures suggest Bangladesh
would significantly reduce its extreme poverty to about 8.9 percent by 2020 given the GDP
growth scenario of the 7th FYP.

Collected and collated by: Amin Bin Hasib