Chapter 01: Introduction

Bangladesh has an agrarian economy with 32% of GDP coming from the Agriculture Sector.
Major agricultural products are rice, jute, wheat, potato, pulses, tobacco, tea and sugarcane. .
The country is the largest exporter of jute and jute goods in the world. Readymade garments
are among the most exportable items. Tea, frozen shrimp, fish, leather goods and handicrafts
are also major exportable commodities. The country has under gone a major shift in its
economic philosophy and management in recent years. At Bangladesh's birth, the country
embraced socialism as the economic ideology with a dominant role for the public sector. But,
since the mid-seventies, it undertook a major restructuring towards establishing a market
economy with emphasis on private sector- led economic growth. During the nineties, the
country has completed a major stabilization program which has reduced inflation as well as
fiscal and current account deficits and established a healthy foreign exchange reserve position
with low and sustainable debt-service liabilities. With modest economic growth, the basic
indicators related to health, education and poverty have all shown sustained improvement.
According to a World Bank estimate, Bangladesh has the 36th largest economy in the world in
terms of GNP based on the purchasing power parity method of valuation, and the 55th largest
in terms of nominal GNP in U.S. Dollars.

According to the IMF, Bangladesh's economy is the second fastest growing major economy of 2016,
with a rate of 7.1%. In the decade since 2004, Bangladesh averaged a GDP growth of 6.5%, that has
been largely driven by its exports of readymade garments, remittances and the domestic agricultural
sector.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
 Chapter 02: Literature Review

Below we have definition of some major economic factors.

Economy: An economy is the large set of inter-related production and consumption activities
that aid in determining how scarce resources are allocated.

GDP: Gross Domestic Product (GDP) is the total monetary or market value of all the finished
goods and services produced within a country's borders in a specific time period.

GNP: Gross domestic product (GDP) is the value of a nation's finished domestic goods and
services during a specific time period. The gross national product (GNP) is the value of all
finished goods and services owned by a country's residents over a period of time.

Inflation: A sustained, rapid increase in prices, as measured by some broad index (such as
Consumer Price Index) over months or years, and mirrored in the correspondingly decreasing
purchasing power of the currency.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
 Chapter 03: Analysis & Discussion

3.1 GDP Growth

Chart 01: GDP growth (at FY06 constant market
Rates: prices)
9
During FY08, the 7.86
8
7.11 7.28
Bangladesh economy 7 6.5 6.5 6.55
6 6.1
showed signs of 6 5.6
5.1
resilience by 5
%

4
maintaining a
3
satisCfactory growth
2
momentum in the face 1
of repeated floods and 0
FY09 FY10 FY11 FY12 FY13
cyclone Sidr, and a
FY14 FY15 FY16 FY17R FY18P
spike in prices of oil,
rice and most commodities in the global market. The Government's growth stimulating and
poverty reduction programs coupled with prudent monetary policies of BB contributed toward
a strong real GDP growth of 6.2 percent in FY08, slightly lower than 6.4 percent of FY07.
During FY09, the Bangladesh economy attained 5.9 percent real GDP growth, only mildly
impacted by the ongoing global slowdown because of the limited openness and strengthened
domestic demand.

Impact of the global economic slowdown on Bangladesh economy showed up with some lags
from early FY09, with downturns in exports, imports and new investment activities.
Consolidating the strong recovery that emerged in FY10 and benefiting from external demand
that remained favorable, the Bangladesh economy moved on a path of rapid and sustained
growth in FY11. The Bangladesh Bureau of Statistics (BBS) estimates real GDP growth for
FY11 at 6.7 percent, the highest ever recorded since FY90.

Despite the global economic downturn and challenging domestic economic environment, the
Bangladesh economy achieved a respectable growth of 6.3 percent during FY12. Using the
1995-96 base year the Bangladesh economy achieved GDP growth of 6.0 percent in FY13, and
6.2 percent using the 2005-06 base.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
The Bangladesh economy maintained the growth momentum registering a 6.1 percent growth
of GDP in FY14. In FY15, Bangladesh graduated to the status of a lower middle-income
country from the low income country, and to OECD Export Credit Eligibility group 5, which
is just below India but ahead of all other South Asian neighbors.

Bangladesh economy grew by 7.1 percent, exceeding the 7.0 percent growth target in FY16
and 7.28 percent in FY17. This growth was mainly supported by industry and services sectors.

Bangladesh economy continued to grow rapidly and achieved a record growth of 7.86 percent
in FY18, over-performing the Government’s FY18 growth target of 7.4 percent. The growth
momentum was supported by strong domestic and external demand. A surge in remittance
inflows at 17.3 percent, along with strong private sector credit growth boosted consumption
demand.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
3.2 Broad Money (M2):

Broad money (M2)

Chart 02: Growth of broad money (M2)
growth stood at 17.6
25
percent in FY08, which 22.4
21.3
was higher than the 17.0 20 19.2
17.4
percent growth recorded 16.7 16.1 16.4

in FY07 and also higher 15

% 12.4
10.9
than the target under the
10 9.2
program. The growth in
broad money was driven 5
mainly by higher growth
in net domestic assets. 0

M2 growth stood at 19.2 FY09 FY10 FY11 FY12 FY13

percent in FY09 and FY14 FY15 FY16 FY17R FY18P

22.4 percent in FY10 mainly by higher growth in net foreign assets also higher than the target
under the program.

M2 growth stood at 21.3 percent in FY11, which is marginally lower than the growth recorded
in FY10 and higher than the target under the program. The growth in broad money was mainly
driven by higher growth in net domestic assets (NDA).

The broad money (M2) growth stood at 17.4 percent in FY12, 16.7 percent in FY13, 16.1
percent in FY14 against the target of 17.0 percent growth under the program. The lower growth
in broad money was attributed mainly to the lower growth in net foreign assets and public
sector credit.

In FY15, M2 recorded a lower growth of 12.4 percent against the target growth of 16.5 percent.
The lower growth in broad money was attributed mainly to the lower growth in domestic credit.
It recorded a higher growth of 16.3 percent in FY16 against the targeted growth of 15.0 percent.
The higher growth in broad money is primarily driven by net foreign asset (NFA).

Broad money (M2) grew by 10.9 percent in FY17, below the target growth of 15.5 percent due
to the lower growth in broad money is driven by both net foreign asset (NFA) and net domestic
asset (NDA). It recorded a lower growth of 9.2 percent in FY18 against the target growth of

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
13.3 percent. The lower growth in broad money is driven by negative growth in net foreign
assets (NFA) stemming from a sharp increase in imports.

3.3 National CPI Inflation:

The rising trend of

inflation of FY07 as
Chart 03: CPI Inflation Rate
measured by CPI 8.8 8.7

continued throughout 7.3 7.4

6.7 6.8
6.4
FY08 due mainly to 5.9 5.8
5.4
higher prices of oil and
some other imported
goods in the
international market,
disruptions in
FY09 FY10 FY11 FY12 FY13
production and supply
FY14 FY15 FY16 FY17R FY18P
caused by repeated
floods and cyclone. Annual average CPI (base FY96) inflation as of end June 2008 was 9.9
percent, compared with 7.2 percent as of end June 2007.

The collapse of global commodity price bubble in 2008 impacted the consumer price inflation
in Bangladesh with some lag. However, that trend of inflation began to ease thereafter with
good domestic harvest bringing down food grain prices and with falling import prices of fuel
oil and other commodities. Annual average CPI (base FY96) inflation as of end June 2009 was
6.7 percent.

Inflation rate maintained upward trend and reached to 7.3 percent in FY10 due to increase of
domestic food grains’ prices along with rising prices of imported essentials in the international
markets particularly those of neighboring markets, inflow of remittances which accumulates
high foreign exchange reserve caused higher than targeted growth of money supply. Inflation
in FY11 rose by 8.8 percent mainly rise in food inflation. The average inflation rate maintained
an upward trend and accelerated to 10.6 percent at the end of FY12 for the increase of non-
food inflation.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
The average inflation rate, using the FY06 new base, moderated to 6.8 percent at the end of
FY13 from 8.7 percent at the end of FY12. Over this period, food and non-food inflation both
are decreased.

The declining trend of annual average CPI inflation, which started from a peak of 7.4 percent
at the end of FY14 and reached 5.9 percent at the end of FY16, further fell to 5.4 percent at the
end of FY17 but increased afterwards reaching at 5.8 percent at the end of FY18. The increase
in average CPI inflation is mainly driven by food inflation, while non-food inflation decreased
slowly.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
3.4 Foreign exchange reserves (billion USD):

Foreign exchange
reserves held by the Chart 04: Foreign exchange reserves
Bangladesh Bank was (billion USD)
USD 6,149 million at
33.5 32.9
the end of FY08 from 30.2

USD 5,077 million at 25

21.5
the end of FY07 and
about to cover 3.8 15.3
10.8 10.9 10.4
months import 7.5
expenses. Reserves
held by the
FY09 FY10 FY11 FY12 FY13
Bangladesh Bank
FY14 FY15 FY16 FY17R FY18P
increased by USD
1,322.2 million to USD 7,471.0 million at the end of FY09 from USD 6,148.8 million at the
end of FY08, about 4.4 months of import cover.

The foreign currency reserves held by the Bangladesh Bank rose by USD 3.28 billion to USD
10.75 billion at the end of FY10, comprising about 5.1 months of import cover. Reserves rose
by USD 0.16 billion to USD 10.91 billion at the end of FY11, comprising about 3.7 months of
import cover.

The foreign exchange reserves at end-year stood at USD 10364.0 million, representing about
3.9 months of import cover FY12, USD 15300 million at end of FY13 reflected improved
external balances, representing 5.5 months of import cover and USD 21508 million at end of
FY14 representing 7.1 months of import cover.

The foreign exchange reserves stood at USD 25021 million at the end of FY15 representing
7.4 months of import cover and USD 30168 million at the end of FY16 representing around 8
months of prospective import coverage.

The reserves stood at USD 33.4 billion at the end of FY17 representing around 8 months of
prospective import coverage and USD 32,943 million at the end of FY18, representing around
5 months of prospective imports, supported by a surplus in financial account and significant
inflows of remittances.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
3.5 Export, Import & Trade Deficit:

Exports and import

Chart 05: Export, Import & Trade Deficit (USD in
achieved robust Million)
60,000
growth in FY08.
50,000
Exports increased to 40,000
USD 13,945 million 30,000

in FY08 and while 20,000

10,000
imports increased to
0
USD 19,486 million 2006 2008 2010 2012 2014 2016 2018 2020
-10,000
in FY08. Trade deficit -20,000
stood USD 5541. -30,000

Export Import Deficit

The pace of export
growth slowed significantly but still maintained a double digits’ steady growth, while import
growth was low in FY09. Exports increased to USD 15,583 million in FY09 while imports
increased to USD 20,291 million in FY09. Trade deficit stood USD 4,708.

Exports and imports picked up sharply in FY11 respectively to USD 22,592 million and USD
30,336 million. Trade deficit stood USD 7,744.

The exports earnings increased to USD 26,566 million from USD 23,989 million and import
payments increased marginally to USD 33,576 million from USD 33,309 million in FY13 over
FY12. Trade deficit declined to USD 7,010 million in FY13 from USD 9,320 million in FY12.

The export earnings continued to increase from USD 26,566 million in FY13 to USD 29,765
million in FY14. During the same time, total import payments increased from USD 33,576
million to USD 36,571 million. Trade deficit declined to USD 6,806 million in FY14 from
USD 7,010 million in FY13.

The export earnings continued to increase to USD 30,697 million in FY15. During the same
time total import payments increased to USD 37,662 million. Trade deficit increased to USD
6,965 million in FY15.

Exports grew faster than imports in recent years. Exports stood at USD 33,441 million in FY16.
During the same period the total import payments also increased to USD 39,901 million from
USD 37,662 million. As export grew more than import, trade deficit shrank to USD 6,460
million from USD 6965 million over the same period.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
Exports stood at USD 34,019 million in FY17. During the same period the total import
payments increased to USD 43,491 million. As import grew faster than export, trade deficit
widened to USD 9,472 million over the same period from USD 6460 million in FY16.

In FY18, imports grew much faster than exports. Exports stood at USD 36,205 million and
total import payments stood to USD 54,463 million in FY18. As imports grew faster than
exports, trade deficit widened to USD 18,258 million.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
3.6 Weighted Average of Interest Rates of both Bank Advances & Deposits
with Spread:

The declining
CH ART 06: INTEREST RATES O N
trend of interest ADVANCES & DEP O SIT WITH SP READ
rates that persisted Interest Rate on Advance Interest Rate of Deposit Spread
over a couple of

13.7

13.7

13.1
12.4
12.3

years till FY05 11.9

11.7
11.3

10.39

9.95
9.56
reversed in FY06

8.5
8.3

7.8
7.3
which continued in

6.8
7

5.54

5.5
5.4

4.85

4.84
5.3

5.3

5.3

4.72
6

5.2
5.1

4.45
4.9

4.9
FY07. Thereafter,
weighted average
interest rate on
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
bank advances
recorded a decrease to 12.3 percent as of end June 2008 from 12.8 percent as of end June 2007,
while that on bank deposits increased slightly to 7.0 percent.

The weighted average interest rate on bank advances on a decreasing trend recorded a decrease
to 11.9 percent as of end June 2009; 11.23 percent in FY10 while that on bank deposits as of
end June 2009 and June 2010 were 7.0 percent and 5.96 percent respectively.

The weighted average interest rate on bank advances started to increase in FY11 and FY12 to
12.4 percent and 13.7 percent respectively, while the deposit rate increased to 7.3 percent as of
end June 2011 and 8.3 percent as of end June 2012.

The weighted average interest rate on bank advances decreased to 13.7 percent at the end of
June 2013 but deposit rate increased to 8.5 percent over the same period and 13.1 percent at
the end of June 2014 and deposit rate 7.8 percent over the same period. The spread between
them widened slightly to 5.3 percent from 5.2 percent over the same period.

The weighted average interest rate on bank advances and deposits declined to 11.7 percent and
6.8 percent respectively at the end of FY15 and the spread between them also narrowed slightly
to 4.9 percent. Lending rates declined due to sluggish domestic credit demand and part of which
was met by overseas loans.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
The weighted average interest rate on both bank advances and deposits declined to 10.39
percent and 5.54 percent at the end of FY16 respectively. The spread also narrowed slightly to
4.85 percent from 4.87 percent over the same period.

The weighted average interest rates on bank advances and deposits declined to 9.56 percent
and 4.84 percent at the end of FY17 respectively and the spread also narrowed slightly to 4.72
percent in FY17.

The weighted averages of interest rate on both bank advances and deposits increased slightly
to 9.95 percent and 5.50 percent at the end of FY18 respectively. The spread narrowed to 4.45
percent in FY18.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018
 Chapter 04: Conclusion

Bangladesh has made remarkable progress in reducing poverty, supported by sustained

economic growth. Based on the international poverty line of $1.90 per person per day, it
reduced poverty from 44.2 percent in 1991 to 14.8 percent in 2016/17. In parallel, life
expectancy, literacy rates and per capita food production have increased significantly. Progress
was underpinned by 6.5 percent growth on average over the decade and reaching to 7.9 percent
in 2017/2018, according to official estimates. Rapid growth enabled Bangladesh to reach the
lower middle-income country status in 2015. In 2018, Bangladesh fulfilled all three eligibility
criteria for graduation from the UN’s Least Developed Countries (LDC) list for the first time
and is on track for graduation in 2024.

Bangladesh is both an inspiration and a challenge for policymakers and practitioners of

development. While the income growth, human development and vulnerability reduction
efforts to date have been extraordinary, Bangladesh faces daunting challenges with about 24
million people still living below the poverty line. The country is at an important juncture, when
with the right policies and timely action, it can move up within the middle-income bracket. The
World Bank has identified job creation as the country’s top development priority. Bangladesh
needs to create more and better jobs to manage the problems related to rising youth
unemployment and informal nature of the jobs. To do so, Bangladesh will need to remove the
barriers to higher investment posed by low access to reliable and affordable power, poor
transportation infrastructure, limited availability of serviced land, uncertain and complex
business regulation, among others. Challenges related to rapid urbanization and climate change
needs to get addressed through long-term planning.

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Analysis of Major Economic Indicators of Bangladesh in FY: 2009-2018