GDP OF BANGLADESH: BANGLADESH ECONOMY AT A GLANCE
According to IMF Database, Bangladesh is the 39th largest economy in the world in terms of Nominal GDP. Whereas it stands on 29th largest economy in terms of Purchasing Power Parity (PPP). The size of the economy is more than $317 billion (IMF, 2019).
Bangladesh has achieved a significant growth in GDP in the last couple of years. Domestic investment made by both government and private sector as well as FDI, Aid, and Loans received are now bringing an upward trend of the GDP growth. If the ongoing success remain constant, possibly this trend may reach a milestone of ‘double digit growth rate’ within the next 5 years.
What factors are contributing more on the GDP of Bangladesh?
The economy mainly comprises of 3 main sectors. Agriculture, Industry, and Services. There are also 15 sub sectors considered into the economic calculation and estimation.
Let’s have a look on the sector- wise contribution.
Agriculture has the lowest contribution to the GDP. It has a downward trend in terms of contribution to GDP. This is happening due to the slower growth in agricultural production. Agricultural production is not growing up as same as that of other sectors. So, the percentage of contribution is slowing down.
Agricultural sectors include Agriculture, Forestry, and Fishing. Main agricultural crops are Rice and Wheat. Fishing Contributed 3.59% to the GDP in FY 18-19.
Industrial sectors are the emerging sectors of this economy. The sector includes 4 sub-sectors which are Mining and Quarrying, Manufacturing, Electricity,Gas, & Water Supply, and Construction. Among these, Manufacturing and Construction sectors contributing on a higher percentage respectively 24.08% and 7.63 (FY 18-19)
Due to many small, medium and large scale investment have been made, Industrial contribution seems to have an upward curve.
Service sector is the biggest role player in every economy of the world. Service sectors contributes more than 50% to the GDP of Bangladesh. It has 8 sub-sectors which are Wholesale and Retail Trade, Hotels & Restaurants, Transport, Financial Organizations, Real Estate & Renting Business, Public Administration & Defense, Education, Health and Social Works, Community, Social & Personal Services
Whereas, Trade and Transport sectors contributed respectively 13.92% and 11.01% (FY 18-19) to the GDP. Service sector has a slight fall in the curve. This has been happened due to the increase of industrial investment.
Drawbacks and Limitations
The main challenge of any growth is to continue it. Sometimes GDP growth becomes stagnant or the growth happens for some special reasons like sudden huge investment.
The main challenges for the GDP growth are explained below.
Looking into the Tax-GDP ratio of Bangladesh, it’s still less than 10%. Even though, VAT and Income tax are the major revenue-sources of NBR, NBR fails to mobilize all the resources to extract the most benefits. Many expert suggested that digital transformation of NBR’s day to day operations is highly needed to expand the horizon of revenue collection. Although, the number of taxable citizen is around 10 million, right now, there are around only 4 million people in the jurisdiction of Income Tax.
Investment to GDP ratio reached 31.57% in FY 2018-2019. For a small economy this ratio must be increased for overall growth.
Bangladesh stands on 168th position in the Ease of Doing Business Report 2020 published by World Bank while Vietnam was on the 70th. This information portrays an image of unpleasant environment for trade and business. Above all, the environment is not conducive to attract FDI. Socio-economic, political, and administrative difficulties are pulling the prospect behind.
Compared to Vietnam, Bangladesh is getting less FDI. Interestingly, Vietnam has less GDP than Bangladesh. But, It received $15.5 Billion FDI in 2018 (Ref: Click here.). Whereas, Bangladesh received only $3.6 Billion. Vietnam is now the main competitor of Bangladesh in world business arena in many context.
Bangladesh has enacted One Stop Service Act, 2018 for the benefits of foreign investors. Bangladesh has established Bangladesh Economic Zone Authority (BEZA) to enlarge country’s investment portfolio. Bangladesh Investment Development Authority (BIDA) is working to attract foreign investment. Even after all these efforts things are not working out the way it was expected.
Government has decided to set up 100 economic zones across the country. It has already given approval for 89 economic zones till now (latest Hosendi Economic Zone). Economic Zones can turn over a new leaf in the context of Investment-GDP ratio.
Financial organizations like Banks, Non-Bank Financial Institutes, Insurance etc are having a tough time. Managing non-performing loans is the main challenge in the financial sector right now. Additionally, deposit crunch is adding insult to the injury. Domestic investment is largely dependent on commercial borrowings. Thus domestic investment is greatly affected by the vulnerability of the commercial banks. Share market is also a place for getting domestic investment. But unexpectedly this market is highly volatile and risky.
Talking about export, Bangladesh has only two sectors which cross $1 billion export earning threshold. RMG and Leather Industry. Over-dependency on RMG and Textile Industry is another challenge for the growth of the GDP. Around 84% of our export earning comes from RMG. Such dependency may hamper overall health of the economy in the long run. Diversification of the export basket is a challenge and must do task for Bangladesh.
Significant amount of trade deficit with China and India is also squeezing the GDP growth. This must be addressed on an urgent basis.
We all can see the progress of the ongoing mega projects and fast track projects. After completion of these projects GDP will see a fall in the GDP growth curve.
Apart from the development of physical infrastructure, social infrastructure like public health, education, and social security are not getting enough resources to be flourished.
Considering all the factors, there is no way to make a paradigm shift in the growth of GDP. But we can hope to have a gradual increment on the dashboard. Let’s work together to build a better Bangladesh.
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