Research(Paper((BUS(530)(

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Economic Conditions of Bangladesh during October 2013- December

2013 (

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Prepared!For!
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Dr.(Zaid(Bakht(
Professor(of(School(of(Business(
North(South(University(

Prepared!By!
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Abdulla(Al(Amin(

!ID:!1411794060!

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!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Section:!02!
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Table of Contents

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Topic

Introduction((

Page(
No.(
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Methodology(

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Limitations(

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Inflation((

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Exchange(Rate(

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Remittances(

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Foreign(Exchange(Reserve(

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Overall(Progress(of(the(Economy(

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References((

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Introduction
The!indicators,!which!relate!to!the!overall!economy,!are!called!Macro!Aggregates.!
These!include!national!income,!inflation,!exchange!rate,!export,!import,!
remittance,!and!money!supply,!FX!reserve!so!on.!These!indicators!relates!to!the!
overall!economy.!The!branch!of!economics,!which!study!the!behavior!of!these!
macro!aggregates,!is!called!Macroeconomics.!
The!main!objective!of!the!study!is!to!select!four!macroNeconomic!factors!and!
know!how!the!factors!of!macroeconomics!work!in!our!country!in!the!reference!
period!(October!2013!to!December!2013)!and!compare!with!the!same!period!of!
2012.!The!macro!aggregates!in!this!report!are!divided!into!4!major!categories,!
which!are:!
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1. Inflation!(Point!to!Point)!
2. Exchange!Rate!
3. Remittance!
4. Foreign!Exchange!Reserve!
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Methodology(
Raw!data!has!been!collected!for!each!of!the!macro!aggregates!for!the!months!of!
October,!November!and!December!of!2013!and!2012.!The!figures!were!then!
compared!against!each!other!and!the!growth!pattern!was!identified!and!
analyzed.!
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Limitations(
While!conducting!the!report,!some!limitations!were!yet!present!there:!
!Because!of!time!shortage!many!related!area!couldnt!be!focused!in!depth.!
!Website!of!different!organizations!of!Bangladesh!contains!different!
information.!

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Inflation((As(measured(by(CPI,(base(2005T06)((Point(to(
Point)(
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Sustained rise in the cost of living is referred to as inflation. (

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InYlation((Point(to(Point)(
8.00%!
7.00%!
6.00%!
5.00%!
4.00%!
3.00%!
2.00%!
1.00%!
0.00%!

October(

November(

December(

2013(

7.03%(

7.15%(

7.35%(

2012(

5.86%(

6.55%(

7.14%(

((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(Bangladesh(Bank(Monthly(Economic(Trends((

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In! the! case! of! inflation,! which! is! measured! by! the! consumer! price,! indexNusing!
FY2005N06!as!the!base!year!has!seen!an!upward!trend!in!the!above!of!months!in!
2013! due! to! continuous! rise! in! food! inflation.! ! The! pointNtoNpoint! and! monthly!
average!both!rate!were!in!increasing!mood!in!2013.!Back!in!September!2012,!the!
food!inflation!was!dropped!by!1.8%,!but!again!it!was!increased!by!8.7%!in!April!
2013.! Food! inflation! began! controlling! from! July,! reaching! 7.9%! in! September!
2013,!but!started!rising!in!October!and!reaching!9.0%!in!December.!On!the!other!
hand!nonNfood!inflation!was!controlled!because!of!the!tightened!monetary!policy!
of!Bangladesh!Bank.!From!11.8%!in!March!2012,!nonNfood!inflation!was!declined!
sharply!4.9%!in!December!2013.!In!December!2013,!the!food!inflation!and!nonN
food! items! accompanied! 70.59%! and! 29.41%! respectively.! Food! inflation!
weights! 58.84%! of! the! CPI! basket! for! calculating! inflation! in! Bangladesh,! and!
thus! it! has! a! greater! impact! on! the! general! or! headline! inflation.! The! reason!
behind!the!pointNtoNpoint!nonNfood!inflation!declining!trend!was!because!of!the!

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slowdown!in!economic!activity!and!sluggish!growth!in!the!private!sector!credit.!
According! to! ADB (Asian Development Bank), the! reasons! of! declining! nonfood!
inflation!were!shrunken!in!the!consumption!of!nonfood!items!resulting!from!the!
higher! cost! of! transport,! fuel,! clothing,! and! house! rent! caused! by! the! political!
unrest.!!In!December!2013,!urban!inflation!was!continued!to!be!higher!than!the!
rural.! Urban! food! inflation! increased! at! 9.9%,! and! nonfood! inflation! at! 5.1%.!
Rural!food!inflation!was!8.6%!and!nonfood!inflation!4.7%.!!
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On!the!other!hand,!pointNtoNpoint!CPI!inflation!during!2012!(OctoberNDecember!
2012)!was!lower!than!the!same!months!of!2013.!It!was!reasonable,!as!we!have!
witnessed! a! huge! political! turmoil! along! with! War! Crime! Verdict! and! the! last!
year!was!the!last!year!of!the!previous!government!before!the!next!election.!We!
have!found!in!2013!the!non!food!inflation!was!lowest!in!December!but!in!2012!it!
was!increased!to!a!doubleNdigit!level!of!10.46%!in!October!2012!from!9.95%!in!
September!2012!later!it!was!declined!to!8.43%!in!December!2012.!!
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Exchange(Rate(

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Exchange!rate!between!two!currencies!is!the!rate!at!which!one!currency!will!be!
exchanged!for!another.!
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Exchange(Rate(
December!

November!

October!
75!

76!

77!

78!

79!

80!

81!

2012(

October(
81.3(

November(
81.5(

December(
80.5(

2013(

77.76(

77.75(

77.75(

82!

(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(Bangladesh(Bank(Monthly(Economic(Trends!

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The! foreign! exchange! market! was! kind! of! stable! over! these! three! months! of!
2013,!which!is!appreciated!from!the!months!of!last!year.!!The!weighted!average!
nominal!(takadollar)!exchange!rate!appreciated!from!Tk!80.5!=!$1.00!at!the!end!
of! December! 2012! to! Tk77.5! =! $1.00! at! the! end! of! December! 2013.! It! was!
appreciated! because! of! declining! in! remittance! inflows,! lower! import! demand!
and!strong!export!growth. Meanwhile!central!bank!kept!up!its!activity!of!buying!
dollars! to! prevent! the! currency! from! appreciating.! ! BB! bought! USD! 1.29! billion!
during!these!three!months.!This!was!necessary!to!ensure!Bangladesh!maintains!
its!competitiveness!with!neighboring!countries!like!India,!which!saw!its!currency!
getting! weaker.! ! As! a! result,! Bangladesh! will! benefit! from! low! oil! prices! as! it!
relies!on!imported!oil.!!
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In!the!case!of!nominal!effective!exchange!rate,!it!was!appreciated!by!almost!8%!
in! November! (2013)! due! to! weaker! demand! for! dollar,! as! import! growth! was!
slower! than! the! export.! ! In! 2012,! taka! was! depreciated! because! of! increasing!
growth! of! remittances;! export! earnings! and! fuel! price! hike! in! global! market.!!
Though!it!was!stable!in!later!part!of!this!year.!Overall,!Bangladesh!appreciated!its!
currency! by! 2.7%! against! US! dollar! from! December! 2102! to! end! of! December!
2013.!!
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Remittance(
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Remittance(
1400!
1200!
1000!
800!
600!
400!
200!
0!

October!!

November!

December!

2013!

1230.68!

1061.45!

1210.21!

2012!

1201.15!

1102.15!

1287.31!

((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(Bangladesh(Bank(Monthly(Economic(Trends!

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Remittances! constitute! important! sources! of! foreign! exchange! earnings! for!

Bangladesh.!It!is!one!of!the!major!factors!of!Bangladeshi!economic!growth.!While!
remittances! cannot! be! considered! as! a! substitute! for! FDI! and! other! official!
development! assistance,! it! may! ease! shortNrun! foreign! exchange! constraints! at!
times!other!financial!flows!decline!due!to!external!factors.!Most!of!the!workers!of!
Bangladesh!who!migrated!abroad!are!working!in!the!Middle!East:!Saudi!Arabia,!
UAE,! Qatar,! Oman,! Bahrain! and! many! other! countries.! There! is! hardly! any!
country!where!Bangladeshi!workers!are!not!present.!The!growth!in!remittances,!

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the! second! biggest! foreign! currency! earning! sector! after! exports,! give! a! much!
needed!pillow!to!government!to!face!a!rising!pressure!on!the!countrys!balance!
of!payments.!!!
Remittance! of! Bangladesh! economy! has! witnessed! a! negative! growth! of! 8.87%!
during!October!2013!to!December!2013!which!was!USD!3.50!billion,!compared!
to! USD! 3.84! billion! in! October! 2012! to! December! 2012.! ! This! was! due! to! the!
16.67%! decline! in! remittances! from! Middle! East! region.! Also,! the! restriction!
against! illegal! workers! in! Saudi! Arabia! and! the! continued! taka! appreciation!
contributed!to!lower!remittance!inflows.!!
Figure:(Growth(in(Remittance((Bangladesh)(

((((((((((((((((((((((((((((((((((((((((((((((
((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(ADB.(Bangladesh*Quarterly*Economic*Update*(

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On! the! other! hand,! out! of! country! jobs! for! Bangladeshi! workers! have! fallen!
sharply!by!almost!14%!in!the!months!of!2013!compare!to!last!year!months.!!This!
was! definitely! one! of! the! major! reasons! behind! the! negative! inflows! of!
remittances.! ! According! to! ADB,! A! total! of! 200,913! Bangladeshis! found! jobs!
outside! the! country! during! the! period,! compared! with! 232,961! in! the!
corresponding! period! of! 2012,! because! of! a! sharp! fall! in! recruitment! in! the!
United! Arab! Emirates! (81.8%),! Saudi! Arabia! (76.0%),! Oman! (15.1%),! and!
Singapore!(1.0).!However,!jobs!for!Bangladeshi!workers!rose!in!Qatar!by!77.4%.!
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Figure:!Out(of(the(country(employment(Growth:((
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((((((((((((((((((((((((((((((((((((((((((((((
((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(ADB.(Bangladesh(Quarterly(Economic(Update((

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Foreign(Exchange(Reserve(
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International(reserve(USD(in(Billion)(
20000!
18000!
16000!
14000!
12000!
10000!
8000!
6000!
4000!
2000!
0!

October!

November!

December!

2013!

17345.4!

17105.9!

18094.6!

2012!

12339.5!

11753.9!

12750.6!

((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((Source:(Bangladesh(Bank(Monthly(Economic(Trends(
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An! important! lesson! of! the! 20082009! financial! crisis! was! that! the! emerging!
market!economies!with!high!levels!of!international!reserves!were!better!able!to!
withstand!the!ripple!effects!of!the!global!meltdown.!Reserves!are!now!generally!
maintained!by!countries!for!meeting!their!international!payment!obligations!!
both!short!and!long!terms,!including!commercial!debts,!financing!of!imports,!for!
intervention!in!the!foreign!currency!markets!during!periods!of!volatility,!besides!
helping!to!boost!the!confidence!of!the!market!in!the!ability!of!a!country!to!meet!
its! external! obligations! and! to! absorb! any! unforeseen! external! shocks,!
contingencies!or!unexpected!capital!movements.!
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In!the!case!of!Bangladesh,!we!have!seen!from!the!above!chart!that;!reserve!has!
gone! up! sharply! to! $18.1! billion! (nearly! 5! months! of! imports)! at! the! end! of!
December! 2013! from! $12.8! billion! a! year! earlier.! ! This! is! because! central! bank!
continued! to! buy! dollar! from! commercial! bank! to! prevent! the! taka! from!
appreciating.!On!the!other!hand!the!in!2013,!there!was!a!lower!demand!for!dollar!
from! the! importers.! As! a! result! it! contributed! to! Bangladesh! bank! s! high!
reserves.!!
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Overall(Progress(of(the(Economy(
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Inflation! remains! to! be! within! control! at! around! 7.35%! YoY! at! December! 2013!
(but! higher! than! the! target).! Though! it! was! the! nonNfood! items! that! made! the!
inflation! stable! or! slowed! down.! We! have! found! that! nonNfood! inflation! was!
lowest! because! of! sluggish! economic! growth! in! private! sector! as! business! and!
consumer! confidence! has! not! recovered! yet.! Imports! have! gone! down! due! to!
political! uncertainty.! Remittances! have! weakened! because! of! crackdown! of!
illegal! workers! in! Saudi! Arabia.! The! limited! skills! of! the! countrys! work! force!
constrain! economic! growth.! A! key! contributor! to! poverty! in! Bangladesh! is! that!
people! lack! the! educational! background! and! skills! needed! to! secure! jobs.! As! a!
result!people!are!losing!their!jobs!in!overseas!and!most!importantly!we!cannot!
send! more! worker! to! outside! to! earn! more! remittances.! Exchange! rate! was!
appreciated! around! 2.7%! YoY! at! December! 2013.! Though! it! was! stable! over!
these! three! months! compare! to! previous! year! months.! Appreciation! of! taka!
might!be!contributed!to!lower!remittance!inflows.!!Though!inflows!of!remittance!
were!declined,!the!lower!trade!deficit!increased!the!current!account!surplus.!!In!
the!case!of!FX!reserve,!we!have!seen!some!tremendous!improvement!over!these!
three!months,!which!was!almost!equivalent!to!5!months!of!imports.!!
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The! key! focus! for! the! government! should! be! revival! of! business! confidence!
because! high! FX! reserves! and! low! inflation! would! not! mean! much! if! private!
investment! does! not! pick! up.! So! government! should! take! necessary! steps! to!
bring!back!the!confidence!of!private!sector,!need!to!create!the!environment!that!
will! attract! investors! to! invest! more! which! will! eventually! help! to! continue!
improving! the! upward! economic! growth! trend! of! our! country.! On! top! of! that,!
they! need! to! focus! on! the! underline! reason! of! negative! growth! of! remittances,!
why! the! workers! send! back! from! Middle! East,! what! are! the! necessary! skills!
necessary!or!we!need!to!improve!to!compete!others.!!
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References((
!
Bangladesh!Bank.!2012,!Major!Economic!Indicators:!Monthly!Update.!Dhaka,!
Bangladesh:!Bangladesh!Bank.!Available!at:!http://www.bangladesh!
bank.org/econdata/openpdf.php?i=6!!
!
Bangladesh!Bank.!2013,!quarterly!Economic!Trends,!available!at:!
http://www.bangladeshNbank.org/pub/quaterly/bbquarterly/octN
dec2013/overview.pdf!
!
The!Daily!Star,!2013, Manpower!export,!remittance!slump,!The!Daily!Star!
[online]!28!December.!Available!at:!http://www.thedailystar.net/manpowerN
exportNremittanceNslumpN4408!
!
The!Quarterly!Economic!Update!(QEU)!by!ADB,!available!at:!
http://www.adb.org/sites/default/files/banNqeuN2013N12.pdf!

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