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The economy continues to grow at an impressive pace. Strong gains in private final
consumption are the main driver. Inflation is expected to remain below 6 percent, close
to Bangladesh Bank's target as flood-related pressure on food prices eases with the
rice harvest recovery. Real rates of growth will average about 7.0% per year in the
medium term.
KEY POINTS
Bangladesh's economy continues to perform impressively. Real GDP will grow by 7.9%
in 2017 - up from 7.3% in 2016.
Inflation was 5.7% in 2017 and prices will rise by 5.6% in 2018. Upward pressure on
prices comes from higher fuel and electricity prices and currency depreciation.
Monetary policy is being tightened.
The real value of private final consumption rose by 7.4% in 2017 and gains of 11.0%
are forecast for 2018. Remittances, a traditional source of support for private
consumption, fell by 0.6% in 2017.
Real rates of growth will average about 7.0% per year in 2020-2025. An increase in
investment, as well as moderate growth of private sector wages will provide support. A
shortage of skilled labour is a major constraint.
FACTS
Area
130,200 square kilometres
Currency
Taka (BDT = 100 poisha)
Location
Bangladesh is a low-lying and densely populated territory lying in the Bay of Bengal
between India and Myanmar. The country occupies most of the delta of the river
Ganges, and has a tropical and humid climate.
Capital
Dhaka
GOVERNMENT
Head of State
Abdul Hamid (2013)
Head of Government
Sheikh Hasina Wajed (2009)
Ruling Party
The Awami League leads a coalition.
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Political Structure
Bangladesh is an independent member of the Commonwealth, with an executive
president elected by parliament. The National Parliament has 330 members, 300
members elected for a five-year term in single-seat constituencies and 30 women
members elected by the parliamentarians; constitutional amendments passed in 2004
will raise the number of women to 45 in the future.
Last Elections
Parliamentary elections took place in December 2018. The Awami League won 257
seats, the Jatiya Party (Ershad) won 22 seats, the Bangladesh National Party won five
seats, whilst the Bangladesh Workers Party won three seats. The remaining seats were
won by several smaller parties and independents. Sheikh Hasina, the Awami League
leader was returned as prime minister in January 2019. In March 2013, President Zillur
Rahman died. Abdul Hamid, speaker of the parliament, was subsequently elected
president.
International Issues
Bangladeshi factories making clothes for 70 mostly European multinationals are subject
to a safety accord. The five-year arrangement was spurred by the death of more than
1,100 people when a Bangladeshi garment factory collapsed in 2013. It was the
industry's worst accident in history.
Discussions with India continue on a number of issues. These include a dispute over
the New Moore/South Talpatty Island in the Bay of Bengal, efforts to allocate divided
villages, and stopping illegal cross-border trade and violence. Relations with Burma are
strained owing to the influx of Burmese Muslim refugees. Bangladesh also serves as a
transit country for illegal drugs produced in neighbouring countries. Flooding, a
phenomenon believed by many Bangladeshis to originate largely in India, has
aggravated tensions.
Bangladesh still has several issues to be resolved with Pakistan from the 1971 war for
independence. They include the division of assets from the pre-1971 period and the
status of more than 250,000 non-Bengali Muslims (known as "Biharis") remaining in
Bangladesh, but seeking resettlement in Pakistan.
ECONOMY
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conditions.
Manufacturing employs 14.4% of the workforce and represents 17.9% of GDP. The
garment industry is the backbone of manufacturing. There are roughly 2 million workers
in the garment industry (most of them women) and another 15 million depend indirectly
on the industry. Garment makers face higher costs and upgraded labour and safety
standards which could pose challenges.
The service sector continues to grow at a healthy pace with a strong performance by
retailing, transport and the wholesale trade. The banking sector is weak and
profitability is declining. The existence of several state-owned commercial banks
(which account for over 30% of all banking assets) undermines efficiency. Bangladesh's
tourist sector is tiny but performing well. The real value of inbound receipts rose by
16.3% in 2017 and growth of 6.9% is expected in 2018. The service sector makes up
56.5% of GDP.
Continued trade reform and greater integration into the world economy have raised the
share of trade in GDP. Bangladesh's capital market, however, remains underdeveloped.
Bangladesh's poorly functioning labour market makes it hard for the government to
achieve its goal of reducing poverty. Bangladesh remains one of the poorest and most
densely populated countries in the world. About 70% of the population is under 35
years.
Economic Prospects
Real GDP will grow by 7.9% in 2017 - up from 7.3% in 2016. Strong gains in private
final consumption are the main driver. Inflation is expected to remain below 6 percent,
close to Bangladesh Bank's target as flood-related pressure on food prices eases with
the rice harvest recovery.
Inflation was 5.7% in 2017 and prices will rise by 5.6% in 2018. Upward pressure on
prices comes from higher fuel and electricity prices and currency depreciation.
Monetary policy is being tightened.
In 2016, the budget deficit was 3.4% of GDP. The deficit fell slightly to 3.3% in 2017.
A deficit equal to 4.3% of GDP is expected in 2018.
The current account deficit is expected to widen from 2.6% of GDP in 2017 to 4.6% in
2018, driven by stronger import demand for food, industrial raw materials, and capital
machinery, while remittances and exports start to recover.
Private investment is constrained by infrastructure bottlenecks, particularly in energy
and transport, and by a high regulatory burden.
The real value of private final consumption rose by 7.4% in 2017 and gains of 11.0%
are forecast for 2018. Remittances, a traditional source of support for private
consumption, fell by 0.6% in 2017.
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Unemployment was 4.6% in 2017 and it will remain at this level in 2018. An estimated
1.4 million workers join the labour force each year.
Bangladesh may have the potential to become a major gas producer (as well as a
supplier to the vast potential market in neighbouring India). However, the size of the
country's gas reserves remains highly uncertain, particularly in relation to future
domestic demand projections.
There have been some improvements in ports, roads, railways and waterways but
much more work is needed. However, persistent power shortages are a deterrent to
economic growth. Other downside risks include the long-term competitiveness of the
garment and textile industry. Domestically, continued political confrontation and
associated disturbances could adversely affect economic activity. Slow progress in
resolving the Rohingya refugee crisis could add to economic, political, and social
pressures.
BUSINESS ENVIRONMENT
Export processing zones have been established in Chittagong (the country's major
port), Dhaka and Comilla. Public-private partnerships will be utilised to boost
investment in infrastructure.
A unified VAT Law was intended to be introduced in 2017 but will now be postponed
for two years. When it is introduced, the new law will make tax administration more
transparent and reduce taxpayers' compliance costs. Customs procedures and foreign
exchange regulations have also been streamlined and tax exemptions are being scaled
back.
One problem for all investors is the frequency of nationwide strikes. When a nationwide
strike is called, Bangladesh is forced to shut down. Economists estimate that these
strikes cost the nation as much as 3-4% of GDP each year. The losses of state-owned
enterprises represent another risk. Finally, power and gas shortages hold back
businesses but the pace of reform is slow.
ENERGY
Bangladesh has a limited amount of oil reserves. Production of crude oil was 0.3 million
tonnes of oil equivalent in 2017.
The country has 0.2 trillion cubic metres of proven natural gas reserves. Production of
natural gas was 23.1 million tonnes of oil equivalent in 2017. Bangladesh may also have
a sizeable amount of additional undiscovered natural gas reserves. Domestic demand
for natural gas is expected to grow by around 6% annually over the next two decades.
Statistical Summary
2012 2013 2014 2015 2016 2017 2018
Inflation 8.8 7.6 7.0 6.2 5.5 5.7 5.5
(%
change)
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Exchange 81.78 78.10 77.61 77.95 78.47 80.44 83.47
rate (per
US$)
Lending 13.9 13.6 12.9 11.7 10.4 9.5 9.7
rate
GDP (% 6.5 6.0 6.1 6.6 7.1 7.3 7.7
real
growth)
GDP 10,552,040.0 11,989,232.0 13,436,744.0 15,158,022.0 17,328,637.0 19,758,154.0 22,384,980.0
(national
currency
millions)
GDP (US$ 129,030.7 153,506.0 173,123.7 194,466.0 220,836.7 245,633.5 268,178.5
millions)
Birth rate 20.4 20.0 19.6 19.3 19.0 18.6 18.3
(per '000)
Death rate 5.5 5.4 5.3 5.3 5.3 5.3 5.3
(per '000)
No. of 35,311.1 35,943.0 36,567.7 37,179.4 37,776.9 38,363.1 38,941.0
households
('000)
Total 22,246.1 25,853.4 28,437.3 29,924.7 30,195.1 31,325.7 33,729.0
exports
(US$
millions)
Total 34,198.3 36,047.0 41,552.7 39,482.5 41,266.5 47,774.5 55,397.7
imports
(US$
millions)
Urban 49,821.8 51,623.5 53,456.6 55,304.8 57,168.3 59,047.3 60,944.0
population
('000)
Urban 32.0 32.8 33.5 34.3 35.1 35.9 36.6
population
(%)
Population 31.1 30.5 30.0 29.4 28.9 28.4 27.8
aged 0-14
(%)
Population 64.1 64.6 65.0 65.5 66.1 66.6 67.0
aged 15-64
(%)
Population 4.9 4.9 5.0 5.0 5.1 5.1 5.1
aged 65
(%)
Male 50.5 50.5 50.5 50.5 50.4 50.4 50.4
population
(%)
Female 49.5 49.5 49.5 49.5 49.6 49.6 49.6
population
(%)
Life 69.7 70.0 70.3 70.6 70.9 71.2 71.5
expectancy
male
(years)
Life 72.6 73.1 73.5 73.9 74.3 74.6 74.9
expectancy
female
(years)
Infant 34.1 32.4 30.9 29.5 28.2 27.0 25.9
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mortality
(deaths per
'000 live
births)
Adult 57.9 61.0 61.1 65.1 72.8 72.9 74.0
literacy
(%)
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