Progress and Prosperity: Bangladesh Economy in 2015

Introduction
With the economy growing annually over 6%, living standards rising for most people and the country maintaining stability throughout 2015, Bangladesh has in recent times been dubbed a development role model having produced consistent progress in economic, social and human development indicators.

In continuation of the profound transformation the county has undergone since the Awami League led government assumed office for the second straight term in January 2014, the nation has been elevated to the lower middle income status in 2015.

Remarkable progress has been achieved for having decreased unemployment and poverty, as well as developing a pluralistic healthcare, extending electricity coverage, enduring quality education for all, revamping infrastructure and stepping up the country's digitization aspirations. Moreover, the country emerged as the developing world’s biggest success stories in attaining most of the Millennium Development Goals (MDGs) and has set new lessons for the world in achieving the recently adopted Sustainable Development Goals (SDGs).

The architect of this surprising model of development is Honourable Prime minister Sheikh Hasina who has set the blueprint with her charter of change “Vision 2021”, the manifesto envisaged and declared by her party before the ninth national parliamentary election. By breaking with orthodox models for progress, HPM Sheikh Hasina, since then, has been helping to forge a new Bangladesh centered on building a middle income nation by the 50th anniversary of our independence and a developed nation by 2041.

Buoyed by this momentum of growth, an overwhelming majority of Bangladeshis appear content to have HPM Sheikh Hasina in charge. A poll released by Nielsen-Bangladesh in last December, echoing previous surveys, gave her an impressive 67% approval rate with equal measure of support for the Awami League led government. On top of that, another survey, commissioned jointly by, British Council, ActionAid Bangladesh and the University of Liberal Arts Bangladesh (ULAB), revealed in last September that, 75% youths see the country as a more prosperous nation in the next 15 years under the Awami League government.

In a series of special reports, we will highlight the activities and achievements which took place in an array of sectors in 2015. The second of our twelve special reports looks at the milestone achievements and state of key macroeconomic indicators in the last year.

Budget Allocation and Implementation

The size of the national development budget has marked almost a threefold rise comparing to that of 2006. Last year, the budgetary allocation for national development stood at $12.34 billion, up from a mere amount worth $3.1 billion just even a decade back. But that road had never been so easy to achieve. It was between 2001 and 2008 when misrule and corruption unleashed by the BNP led alliance had spawned an epidemic of poverty and hunger. Those memories no longer haunt the nation. In 2015, an amount worth $4.77 billion, up from $1.46 billion in 2005, has been extended as budgetary allocation for making social safety initiatives ever more inclusive, which accounts for 12.72% of the national budget.

To fight the curse of poverty, an initiative “Employment for Ultra-Poor”, introduced by the present government, has generated an 80 day employment scheme for around 5.4 million people over the last six years. Last year, as many as 8,80,000 people received the fruition of that programme, resulting in the country witnessing the highest rise in rice equivalent wage. With a twofold increase in last six years, the value of that scale soared to 8kg last year from 5 kg in 2005. In a space of a decade, the rate of poverty decreased by 18%, coming to 22.4% from 40%. Moreover, according to the latest Hunger and Nutrition Commitment Index, Bangladesh ranked second in South Asia to lead the table for lifting people from the clutches of hunger. The report, published for third consecutive year, puts Bangladesh in the 14th position among 45 developing countries, up from 20th in 2014.

Graduation to Lower Middle Income Status
Bangladesh’s graduation, forty four years after its independence, to the lower middle income status, appeared as one of the biggest occasions for national exuberance last year. The country has joined an upgraded league where 51 out of 215 countries of the world are placed. The Gross National Income per capita (GNI) hit an all time high at $1,314 which was $1,154 even three years ago. This GNI was higher than the Washington-based lender's set threshold. The rise in per capita income makes Bangladesh the 58th largest economy in the world in terms of nominal value. On the scale of purchasing power parity, the per capita income in the country is $3,019, making the economy the 33rd largest in the world.

According to World Bank and IMF, Bangladesh has emerged in 2015 as the world’s 44th largest economy in terms of the Gross Domestic Product (GDP), advancing 11 notches from the previous year. In 2015, the value of GDP per capita went up at $1,235 which was only $514 ten years back. Last year, the country’s GDP grew at 6.51%, up from 5.1% in 2009. Breaking all records of the past, the country managed to maintain 6.18% growth over the last six consecutive years. Another country rating by the Organization for Economic Cooperation and Development (OECD) stated that Bangladesh has outperformed all the South Asian countries expect India, and moved up to category 5 from 4. Moreover, World Economic Forum put Bangladesh two notches up in last year's Global Competitiveness Index due to the progress in the areas of macro-economy, health, education and infrastructure.

Forex Reserves and Remittance Inflow 
Country’s foreign exchange reserve has registered a whopping 27 times increase in 15 years. In 2001, the country had to defer its payments to the Asian Clearing Union (ACU) for imports to avoid compromising the $1 billion foreign exchange reserve as that would undermine its global image. But last year, the reserve hit all time high at $27 .4 billion for the third time. The reserves were enough to cover the country's imports for approximately eight months. Lower import of raw materials due to improved backward linkages, and less import of food for better local production also helped cut import bills to boost the forex reserves. Throughout 2005, the earning from remittance stood at $4.8 billion. And during the first half of this fiscal year, expatriates sent an amount worth $7.45 billion as the manpower export marking a 30% rise. According to the Bureau of Manpower, Employment and Training, around 4,20,000 men and 76,0007 women migrated to different countries in the last twelve months for overseas employment.

Inflation 
The beginning of the year saw inflation continue its downward trend, coming down to 6.11% - the lowest in 25 months. Inflation fell to its lowest level in 10 months in November, coming down to 6.05% from 6.19% a month back. As of November last, food inflation fell 17 basis points from October to 5.72% and non-food inflation 11 basis points to 6.56%.

Seventh Five Year Plan: 8% Growth by 2020
Centered on the theme “Accelerating Growth, Empowering Citizens”, this plan, approved, in October last, envisages taking the GDP growth rate at a whopping 8% by 2020. Under the plan, the average growth rate is projected at 7.4% over the said period and the flagship plan seeks to raise the GDP growth rate progressively from 6.5% in FY2015 to 8% by FY2020. Target has been set to create 12.9 million additional jobs , including 2 million jobs abroad for migrant workers. Moreover, works are underway, in accordance with the plan, to reduce poverty rate from 22.4% to 18.6% and extreme poverty to around 8.9% by 2020.

People's Wealth Trebled 
According to a research published in October 2015 by the international financial service organization, Credit Suisse, Bangladeshis have their amount of economic wealth increased by threefold in the space of last 15 years, while that of adult citizens has doubled. Country's adult population was 70.2 million in 2000, which grew to 100.7 million by mid-2015. Correspondingly, the said group commanded a wealth worth $237 billion in 2015, up from 78 billion, with the per capita wealth of that populace increasing from $1,069 to $2,201. In between this period, the amount of economic wealth has risen from $441 to $795, and the quantum of immovable wealth from $652 to $1,470.

New Strategy by Central Bank
After achieving 94% of the targets set in the first paper illustrating work plan for four years till 2014, the Central Bank proceeded with a new five year strategy aiming to achieve inclusive growth and price stability, fortify supervision and push for sustainable development. Launched in September last, the paper has 14 goals while some 105 objectives, 310 action plans and 395 key performance indicators have been fixed to achieve the strategic goals.

The areas this plan has prioritized are: balanced and coordinated monetary policy; supervision and regulation for ensuring financial stability, and optimization of human capital. Financing has been increased in the agriculture, SME and environmentally significant sectors. People got the chance to open bank account at TK 10, and sharecroppers got credit. Besides, it has taken into consideration the sustainable, eco-friendly and inclusive economic growth, capacity building of the financial sector to withstand shocks and keeping active financial intermediation process.

Inclusive Banking Vindicated
Bangladesh Bank Governor Atiur Rahman has been named the best central bank governor in the Asian region by London-based publication Emerging Markets for earmarking far reaching initiatives that successfully upheld macroeconomic stability and expanded financial inclusion in Bangladesh.

Leaving India behind, Bangladesh won the ‘Child and Youth Finance International' Country Award 2015 for the central bank’s school banking scheme and other activities including the financial inclusion of children. Students in Bangladesh can open bank accounts with just $1.2 as deposit, with no other charges applying. More than 900,000 accounts by children exist, with total deposits amounting to $90 million.

Inclusive Economy 
According to a study revealed, last year, by Institute of Microfinance (InM), a microcredit think-tank, four in five households in Bangladesh have access to financial services. Access to financial services, including insurance, stood at over 79% in 2014, compared to 77% in 2010. It further shows, over 40% of households in rural regions can access formal financial services, which was 32.8% four years ago. Access to formal financial services by poor households that are constrained by service charges, collateral and a lack of financial literacy, stood at 24.19% in 2014, up from 19.53% in 2010. In 2014, 47% of households were able to access microfinance, which was 43.23% about four years back. Rapid improvement in the networks of banks and microfinance institutions as well as a booming mobile banking segment contributed largely to this attainment.

Decline in Dependence Ratio
The number of people dependent on others for livelihood has dropped by 8% over the last five years thanks to their increasing participation in the economy, according to a survey conducted and published by the Bangladesh Bureau of Statistics (BBS). The national dependency ratio stood at 58% in 2013, down from 66% in 2009. A nearly equal number of people were employed in jobs in rural and urban areas during the period. The number of economic units stood at 8.75 million in 2013, up 118% from the previous edition of the survey published in 2009.

Expansion in Middle Income Group
In another survey, Bangladesh Institute of Development Studies found that, 20% of the population belongs to the middle-income category, up from a 9% in 1991. A person belongs to the middle-class category when his/her income ranges between $2 and $3 per day. The findings show, at the present growth rate, one-fourth, or 25%, of the total population will belong to the middle-class income category by 2025 and 33% will be elevated to that status by 2030. Moreover, the unemployment rate marked a dramatic decline to 17.8% in 2013, which was 24.5% in 2006.

Economic Units Doubled 
The number of economic units has doubled between 2003 and 2013 riding on the fast expanding non-farm activities across Bangladesh, according to the government's latest census released last year. In 2003, the number of economic units was 3.7 million which swelled to 7.8 million in 2013, according to the Economic Census of 2013 that was released last year. The economic units have increased 71% since 1986, when the first economic census in the country took place.

Economic units went up 62.61% to 2.3 million in the last decade, while those in the urban areas rose 71.48% to 5.5 million in 2013. Households with economic units also increased over the period from 9,00,023 in 2003 to 2.8 million in 2013. The number of female-headed households increased five times since 2003 to more than half a million in 2013. The number of permanent establishments rose 50% to 4.5 million in 2013 from 2.9 million a decade ago, showing that the base of the economy is getting stronger.

Global Perception
The WB and ADB both have revised upward the growth forecasts for Bangladesh, projecting that the economy would grow to 6.7% in this fiscal year. Expressing wonder at the country’s growth, WB’s Chief Economist Kaushik Basu pinned hopes that a target of 8% growth rate is even achievable for the people in this land. Additionally, according to a recent survey by HSBC, Bangladesh has topped the global confidence trade index gaining 131 points among 25 countries including the likes of USA, China and India, emerging as the best investment destination for global businesses and having potentials to witness a rising and growing economic outlook for the next six months.

Moreover, both Standard and Poor and Fitch Ratings, leading global credit rating agencies, forecasted that the country’s economic outlook is rated to remain in a stronger state for the second consecutive year. Stable real GDP growth and persistently strong foreign-currency earnings have earned the country “BB” ceiling.