Economic Development Status of Bangladesh

Economic Development Status of Bangladesh Md Tanvir Ahmed Ms in Agricultural Economics Student Number: 2013-98491 1. Introduction Bangladesh is a South Asian country surrounded by India to the East, North and West. It has border with Myanmar (Burma) to the south-east and also surrounded by the Bay- of- Bangle to the South. Bangladesh got independence in 1971 from Pakistan through the liberation war. Bangladesh is an inhabitant of more than 160 million people with in 55.598 square mile. Figure 1 : Map of Bangladesh The economy of Bangladesh is agricultural driven. Total of 54% of the population of the nation is directly and indirectly involved in farming and lives in rural areas (World Bank, 2011). Due to soil fertility and ample supply of water, having the blessing of thousands of rivers and its branches zigzagging nationwide, Bangladesh can harvest three crops every year. Apart from the fact that cyclones and floods damage crops every year, the production of crops meets substantial local consumption demand but are not grown sufficiently enough for export purposes. Labor-intensive manufacturing is the second sector, specially RMG (Ready-made garments industry), where both men and women are engaged in generating foreign revenue and contributing to the GDP. The third sector which contributes greatly to the economy of the nation is the export of manpower which brings remittances by Bangladeshi workers working abroad, such as in Middle-East, Singapore, Malaysia, etc. From the CIA World Fact-Book, published in 2012, economy structures of Bangladesh are shown bellow; Facts Figures Population 166.7 million GDP (Purchasing Power Parity or PPP) 311 $ billion GDP growth rate (Real growth rate) 6.1% GDP per capita (PPP) 2100 $ Unemployment rate 5% Inflation 8.8% Poverty rate 27.5% 2. Current Macroeconomic Scenario of Bangladesh Despite the global economic crisis, Bangladesh economy has not only managed to sustain sound and resilient but also developed a strong base with many far-reaching activities and appropriate policy responses during the last four years. Major indicators of macro economy namely GDP, import-export, remittance inflows and foreign exchange reserves showed substantial upward trend. Inflation is also in a declining trend due to prudent monetary policy stance of Bangladesh Bank. The current status of some major economic factors are described below to explain the economic development of Bangladesh; Gross Domestic Product (GDP): With a developing economy, Bangladesh has similar problems like that of any other developing area in the world. Since poverty is prevalent in order to improve the quality of its inhabitants, both economical and social problems need to be addressed. The government of Bangladesh is seeking development through the betterment of the economical situation of the country, hoping it will lead to an improvement in the social situation as well. The GDP (Purchasing Power Parity) of Bangladesh has been showing upward trend since its independent. The following table depicts the GDP of Bangladesh year by year. In the year of 2012, the size of the Bangladesh’s GDP was 311 billion US $. Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP (PPP) Billion US Dollar 187 203 230 239 258.8 275.7 305.9 336.7 208.3 224 241 258.6 285.8 311 Even though half (50%) of the country's GDP is generated through the service sector, the economy of Bangladesh is primarily based on agriculture and more than half of the population, a total of 54% and around 43.6% of the workforce, is directly and indirectly engaged in agriculture and Figure SEQ Figure \* ARABIC 2 : Sector wise contribution to GDP over the period farming. Bangladesh is the world's largest producer of jute and other main crops include; rice, tea, wheat, sugarcane and tobacco. However, the fact that cyclones and floods damage crops every year makes it difficult to produce enough for export purposes. Considering these problems, agricultural (crop and non-crop) sector contributes about 20% of the GDP. This sector was declared a priority by the government due to its importance to food self-sufficiency and to the sustainable development of the country. The private sector has been playing a meaningful active role in the country's economy while the public sector has been focusing more on the physical and social infrastructure, which has been leading Bangladesh to industrial and service growth. The following graph shows the increasing trend of GDP (Purchasing Power Parity) from 1999 to 2012. Figure SEQ Figure \* ARABIC 3: increasing trend of GDP (PPP) over the period GDP Growth Rate: Though there are a number of political and social problems affecting the economy of Bangladesh, but it has been maintaining more than 6% growth rate since last 10 years. This is a very significant sign of the development of Bangladesh’s economy. Annual real GDP growth of 5.74%, 6.07%, 6.71% and 6.32% respectively have been recorded for the last four fiscal years (2009-2012). Average GDP growth rate over the last four years (2009-2012) has been 6.21%, which is 0.74% higher than that of previous four fiscal years (2002-2005). The following graph describes the year wise GDP growth rate of Bangladesh. Figure 4: Year wise growth rate of Bangladesh from 2004 to 2013 The following figure also shows the upward trend of the economic growth rate of Bangladesh since 1961 to 2009. Per Capita GDP (PPP): Per capita GDP at Purchasing Power Parity (PPP) also shows significant improvement over the last 10 years. But it is still very low ($ 2100 in the year of 2012). Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP per capita (US Dollar) 1,470 1,570 1,750 1,700 1,900 2,000 2,100 2,300 1,400 1,500 1,600 1,700 1,700 2100 The graph below shows the fluctuation of per capita GDP from 1999 to 2011. In 2007, the per capita GDP fall down to $1,400 which ware $2,300 in 2006. It proves that income of the people has increased significantly as well as the purchasing power. Figure 5: Per capita GDP over the period Inflation rate: The rates of annual average CPI inflation were 5.4%, 8.1%, 10.7% and 8.8% respectively at the year of 2009, 2010, 2011 and 2012. Currently, inflation is at a comfortable single digit level. The following table and graph shows year wise ups and down of the inflation rate since 1998 to 2012. Year 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Inflation rate 9 5.8 3.1 5.6 6 7 7.2 9.1 8.9 5.4 8.1 10.7 8.8 Figure 6: inflation rate of Bangladesh over the period from 1998 to 2011 Unemployment: In recent years, due to some effect programs taken by the government, unemployment rate has declined enormously. In 2004 the unemployment rate was 40%, which reduced drastically in 2006 and the following years. Year 1996 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Unemployment rate 35.2 35 40 40 40 2.5 2.5 2.5 5.1 4.8 5 5 Figure 7: Unemployment rate in Bangladesh over the period from 1996 to 2011 This indicator shows the improvement of the employment opportunities in Bangladesh in recent years. Poverty Rate: Despite considerable thrust on poverty alleviation in all plan documents since the independence of Bangladesh, a significant portion of population is still living below the poverty line. It is a constitutional obligation of the government to provide a decent living standard for the citizens by alleviating poverty. Since 1991, the rate of poverty has been decreasing 1 percentage, on an average, in each year. In 1991 the rate of poverty was about 49 % which is 27.5% in the year of 2012. Year 1995 2004 2008 2010 2012 Poverty rate 35.6 45 36.3 31.51 27.5 Figure 8: poverty rate of Bangladesh 3. Conclusion Bangladesh, since its independence has come a long way in terms of achieving economic development. But in comparison other countries which are more or less the same age have exceeded Bangladesh in economic development. Bangladesh which is 8th most populated country in the world has found herself back footed due to the burden of over population. The density of population is 1600 per kilometre tells the magnitude of the problem. The limited resources should go to meet the basic needs of the population as well as be used to build infrastructure which would pave the way for greater economic growth. The high growth rate alone is not sufficient for economic development; growth needs to be poverty-friendly and sustainable. Thus for sustainable development Bangladesh needs to improve in economic, social and political development. References CIA World-Fact Book, Year- 2012 BBS: Bangladesh Bureau of Statistics, 2011 Department of Agriculture, Ministry of Agriculture website Published journal paper and reports