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Asia’s most compelling growth story is right here in Bangladesh
Muhit Rahman
2021 is a very special year for Bangladesh. This year we celebrate 50 years of our achievements as a nation, built on our innate strength and resilience.
The country has achieved sustained progress, culminating in stellar growth in the last 12 years and nearly quadrupling of the GDP during the period.
The continued development across primary, secondary, and tertiary sectors has set a model of growth that has defied the odds, and the world has begun to take notice.
Within this period, the economy has transformed from reliance on readymade garment to exemplary progress in multiple export sectors and increased attractiveness as a destination for both foreign direct investment and foreign portfolio investment.
Whilst all these attributes have helped build a collective platform for growth, there is no doubt that Covid-19 has challenged us. But more importantly, perhaps, Covid-19 once again showed the true mettle of the character of Bangladeshi people, businesses, and the economy.
The government’s timely and judicious efforts combined with the hard work of the people and the bravery of the front-liners have all crafted the trajectory forging one of the highest economic growth rates in the world in 2020, an enviable achievement in the most challenging of years.
This is an economy that Standard Chartered research shows could become the 23rd largest (measured by market exchange rate) by 2030, riding on a decade of stable government, sustained infrastructure investment, growing strong domestic demand, and demographic dividend.
The Harvard Business Review recently identified Bangladesh as one of the “break-out economies” that has the potential to digitalise rapidly for both post-pandemic recovery as well as longer-term transformation towards achieving the Sustainable Development Goals (SDGs).
While the pace and distribution of global recovery remain highly uneven, Bangladesh has made a strong comeback and remains a key growth outperformer amongst the peers.
Its currency has been hailed as the best-performing currency across emerging market economies in Asia. In August, Standard & Poor’s reaffirmed the sovereign ratings at BB- (long term) and B (short term) and said it expected Bangladesh to achieve higher than average economic growth than its peers even in the face of stout near term challenges.
A robust vaccination programme and implementation of strategic infrastructure projects are expected to accelerate momentum. As the vaccination drive continues and is expected to reach critical levels of 80 per cent before the middle of 2022, the economy is set to accelerate, riding on export demand, strong remittance inflows, and domestic consumption.
With structural drivers such as favourable demographics, rising urbanisation, expeditious digitalisation, increasing financial inclusion and empowerment, we have every reason to be optimistic about our huge prospect of Bangladesh.
Standard Chartered’s research corroborates this picture, with GDP growth forecast at 7.2 per cent in FY22. The momentum will be driven by an export demand recovery, strong remittance inflows and public investment. This means that the economy is set to cross the $500-billion threshold by FY2025, with per capita GDP set to reach $3,000.
Its rising share in the global GDP over the same period shows that this is an economy that is not only ascending but also outpacing its peers. The taka has been best performing amongst the emerging market currencies and is expected to continue to outperform on the back of robust remittance flow and healthy foreign exchange reserve.
However, with the pandemic having set off tectonic shifts in the global value chain, the economy will face stiffer tests ahead.
Parameters such as labour productivity will come under the spotlight further. For every million dollars’ worth of garment export, 142 workers are employed in Bangladesh, compared to 48 in Vietnam and China and 75 in Cambodia. The upside of this, as shown by Standard Chartered research, is there are significant opportunities for productivity gains through technology adoption, technology inclusiveness through mobile-based solutions, and the information technology-enabled services sector. The task ahead of us is to leverage this opportunity by fostering an ecosystem that drives innovation and technological adoption across industries and a financial system infrastructure that supplements overall strategies and augments growth potential.
Bangladesh has established a firm reputation for prudent fiscal policy management. In this regard, Bangladesh was rated the ninth strongest economy amongst a list of 66 countries by the Economist magazine on the basis of four indicators of financial strength.
At a total debt-to-GDP ratio of about 39 per cent, the external debt-to-GDP ratio of 17 per cent and annual debt servicing of less than 10 per cent, there is ample opportunity for Bangladesh to tap into global markets and avail foreign currency financing solutions.
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