Bangladesh's Economic Growth and Prospects

Jul 11, 2024

Bangladesh's Economic Growth and Prospects

Overview

  • Recent Growth: Bangladesh has shown rapid economic growth over the past few decades.
  • GDP:
    • 61 billion USD in the past.
    • 446 billion USD as of 2023.
  • GDP per capita:
    • 483 USD earlier.
    • 2,620 USD in 2023, surpassing India and Pakistan.
  • Future Projection: Potential to become a trillion-dollar economy.

Feasibility of a Trillion-Dollar Economy

  • Growth Rate:
    • Grew at 6.4% from 2016 to 2021, outpacing peers (Vietnam, India, Indonesia, Philippines, Thailand).
  • Consumer Market:
    • Domestic consumption is a significant driver.
    • Household consumption accounted for 69% of GDP in 2021.
    • Definition: Consumption is using up resources/purchasing goods and services.
    • Consumption stimulates production, employment, and investment.

Projections and Drivers

  • HSBC Report: Bangladesh will be the fastest-growing consumer market globally over the next decade.

    • Expected to be the 9th-largest consumer market by 2030.
    • Significant growth of the middle and affluent class (MAC).
    • MAC population: From 12 million (2015) to 34 million (2025).

  • Young Workforce:

    • Median age: 28 years.
    • 68.4% of the population is of working age.
    • 114 million working-age citizens.

  • Financial Resilience:

    • High savings rate: 34% of GNI.
    • Low national debt: 19% of GDP.
    • Comparison: Other Asian peers have higher debt (Vietnam, Indonesia, Thailand, India, Philippines).

Implications of High Savings and Low Debt

  • Economic Stability: High savings create a buffer against economic shocks.

  • Investment Capacity: Facilitates investments in infrastructure, education, and healthcare.

  • Reduced Foreign Dependency: Lower need for foreign capital, reducing vulnerability.

  • Government Spending:

    • Increased from 532 billion Taka (2012) to 2,254 billion Taka (2022).

Sectors Driving Growth

  • Private Sector:
    • Textiles and apparel industry: significant global player.
    • Telecom Industry: Led by GrameenPhone, Robi, Banglalink.
    • Startup Ecosystem: Over 1,200 startups, focus on FinTech, logistics, mobility, e-commerce. Notable startups: bKash, ShopUp, ChalDal, Pathao.
    • Global Presence: Companies like PRAN-RFL, Renata, Square Pharmaceuticals, and Fortune Shoes.
    • Electrical & Electronics (E&E) Market: Walton's international expansion.

Future Growth

  • Debt Leveraging: Possibility for firms to leverage more debt for growth.
  • Growth Rate Scenarios:
    • 10% growth rate needed to reach the trillion-dollar mark by 2031.
    • 5% growth rate would reach the mark before 2040.

Challenges

  • Potential Barriers:
    • Primarily governmental issues such as corruption.
    • Otherwise, financial position and foreign investment remain strong.

Conclusion: Bangladesh is on a promising trajectory to becoming a trillion-dollar economy with its strong consumer market, growing workforce, financial resilience, and dynamic private sector.