Bangladesh flag Bangladesh: Economic and Political Overview

The economic context of Bangladesh

Economic Indicators

Bangladesh recorded one of the fastest growth rates in the world in the past few years, with stable economic performance that has helped to reduce poverty and social inequalities. However, the Bangladesh economy has faced numerous shocks, including disruptions stemming from Russia's conflict in Ukraine and global monetary tightening, which have disrupted a robust post-pandemic rebound, leading to a slowdown in real GDP growth to 6% in FY23, from 7.1% one year earlier. Projected to persist at 6% in FY24 and accelerate to 6.6% the following year, real GDP growth relies on relatively resilient exports, despite subdued private demand (IMF).

The fiscal stance is expected to maintain neutrality, with a fiscal deficit of 4.6% of GDP in FY24, which remains largely unchanged from FY23. The current account deficit is anticipated to remain compressed at around ¾% of GDP in FY24, while improvements are expected in the financial account, including timely repatriation of export proceeds. Foreign exchange reserves are forecasted to gradually increase in the near term and are projected to cover about four months of prospective imports in the medium term. Nonetheless, uncertainties surrounding the outlook remain significant, with risks leaning towards the downside. The IMF estimated the country’s debt-to-GDP ratio at 39.4% in 2023, up from 37.9% one year earlier, with a stable outlook over the forecast horizon (39.9% in 2025).
Headline inflation hit a decade high at 9.9% year-on-year in August 2023, averaging 9% throughout the year. Inflation is expected to ease to 7¼ percent year-on-year by the end of FY24, although the moderation will be gradual due to heightened inflation expectations. Bangladesh is one of the most vulnerable countries in the world to climate change, with extreme weather events estimated to have caused a loss of around 1.8% of GDP in the past few decades. The country has taken measures to promote green financing and is seeking grants from the international community, notably via the Green Climate Fund.

Bangladesh's unemployment rate was estimated at 4.3% in 2022 by the World Bank (latest data available). However, the informal sector is a very significant area of the economy and employment in Bangladesh, particularly for the less skilled people. Other social issues include constant social strikes, terrorist threats, limited access to capital by the population, and disputes over Teesta River water distribution with India. According to government data, the poverty rate in the country has been reduced from 41.5% in 2006 to 18.7% in 2022, and extreme poverty has gone from 25.1% to 5.6%.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 460.20446.35455.16491.82546.92
GDP (Constant Prices, Annual % Change) 7.16.05.76.67.1
GDP per Capita (USD) 2,7312,6212,6462,8313,118
General Government Gross Debt (in % of GDP) 37.939.841.441.842.4
Inflation Rate (%) 6.29.09.36.15.7
Current Account (billions USD) -18.64-3.33-3.68-13.44-16.50
Current Account (in % of GDP) -4.1-0.7-0.8-2.7-3.0

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

The Bangladeshi economy relies on its enormous human resources, rich agricultural soils, and abundant water resources. Agriculture represents 11.2% of GDP and employs 37% of the total workforce (World Bank, latest data available). Main crops include rice, tea, jute, wheat, sugarcane, tobacco, spices, and fruits. Bangladesh is the world's fourth-biggest rice producer, although shortages caused by natural disasters occasionally force the country to import rice. Jute, once the country's primary export crop, remains a significant contributor to the economy, although its importance has diminished over time. According to the Bangladesh Bureau of Statistics (BBS), the growth in the agriculture sector for the fiscal year 2022-23 slowed to 2.61%, down from 3.05% in the previous fiscal year.

Industry represents 33.9% of GDP and employs 22% of the total workforce (World Bank). The textile and garment industry is the cornerstone of Bangladesh's industrial economy, contributing significantly to export earnings and providing employment to millions of people, particularly women, across the country. The pharmaceutical sector has also witnessed notable growth, with Bangladesh emerging as a key player in the global generic drug market. Light manufacturing industries such as electronics, footwear, and plastics are gaining momentum, fueled by favorable government policies and increasing foreign investment. Data from the BBS show that the industrial sector registered a drop in production from 9.86% to 8.18% in FY2022-23. According to BBS calculations, production in the manufacturing sector fell by 2.18% to 9.23%.

Services account for 51% of GDP and employ 41% of the total workforce (World Bank). Key sectors include telecommunications, banking and finance, transportation, and the burgeoning IT sector. Telecommunications has experienced remarkable growth, with widespread mobile phone penetration and increasing internet connectivity transforming communication networks across the country. The IT sector is emerging as a promising area, with a growing number of companies engaging in software development, outsourcing, and IT-enabled services.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 37.1 21.7 41.2
Value Added (in % of GDP) 11.2 33.9 51.0
Value Added (Annual % Change) 3.1 9.9 6.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
56,5/100
World Rank:
120
Regional Rank:
25

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
5.02/10
World Rank:
71/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Finance
Statistical Office
Bangladesh Bureau of Statistics
Central Bank
Bangladesh Bank
Stock Exchange
Dhaka Stock Exchange
Economic Portals
Bangladesh Economy
 

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Latest Update: April 2024