Bangladesh Quarterly Economic Update (December 2009)
The Bangladesh Quarterly Economic Updates provide recent economic data about the economy in Bangladesh. This issue includes economic data up to December 2009.
Bangladesh attained a reasonably healthy economic growth of 5.9% in FY2009. At the initial stage, lower integration of the country’s financial sector with the global financial system and the absence of any exposure of the banking system to toxic assets, kept the economy insulated from the adverse effects of the global financial meltdown. Although Bangladesh’s two main growth drivers—exports and remittances—are directly linked to the health of the global economy, they too remained relatively unaffected in the first year of the global crisis. The country’s export concentration at the low-end of the readymade garments (RMG) product market protected Bangladesh, as demand for these products was not seriously affected in the initial phase. The growth in remittances was less affected as Bangladesh relies on oil-rich middle-eastern countries for more than 60.0% of remittance inflows. These countries were able to maintain the bulk of their construction activities as oil prices remained high through most of the crisis period. In addition, the large outflow of workers in 2007 and 2008 was helpful in maintaining the reasonably high growth in remittances, as these new workers began to send remittances after an initial period of settling down.
- Decreasing exports and continuing weak investment will slow the economy's return to the pre-crisis growth trajectory.
- Growth is projected to slow to 5.5% in FY2010.
- Agriculture sector growth is expected to moderate but will remain strong due to broad-based government policy support.
- Industry sector growth is constrained by weak external demand along with acute shortages in power and energy supply.
- Services sector growth will gradually increase as trade activity and the industry sector recover.
- Excess liquidity in the banking system and rising global commodity prices are likely to push up the inflation rate.
- Bangladesh needs to rebalance its sources of growth by diversifying productive activities, particularly its export base.
- Attaining higher long-term growth will depend on increasing domestic and foreign investment, especially for infrastructure.
- Increasing the tax–GDP ratio and scaling up annual development plan implementation are the major fiscal challenges.
- Macroeconomic Developments
- Sector Performance and Economic Growth
- Fiscal Management
- Monetary and Financial Developments
- Balance of Payments
- Exchange Rate
- Capital Markets
- Export Diversification in Bangladesh: Key Issues
- Trends in Export Concentration
- Government Policy for Export Diversification
- Policy Issues
- Concluding Observations