Bangladesh is moving towards middle income country myth or reality

“Bangladesh is Moving TowardsMiddle Income Country”

Myth or Reality ?

© Riadh Mohammed Arif

Highlights

This year Bangladesh has been upgraded from low income country (LIC) toLower middle income country (LMIC) as per World Bank’s classificationbased on per capita income.

Bangladesh aspires to emerge Middle Income Country (MDC) from LessDeveloped Country (LDC) by 2021 as per United Nation’s classification.Now it’s very important to assess whether this is reality or myth.

Bangladesh’s economy continues to do well. Macro & Micro environmentremain stable, declining interest rate and disinflation are playing vital rolein stabilizing the economy.


Highlights

Increasing public expenditure on education and health care will leadsustainable growth.

Strong structural reform through mega infrastructural projects, increasingenergy production, efficiency in financial sector can help to achieve thegoal.


Positivity in Sustainable Development

World Bank ranked among the top 12 developing countries with apopulation of over 20 million, who achieved above 6% growth inrecent years and expected to continue in the future.

International Monetary Fund (IMF) forecast Bangladesh will recordsecond (2nd) height growth in the world in 2019 with 7% growthrate.

Goldman Sachs classified Bangladesh among next 11 economicsidentified for having great opportunities for investment in foods andbeverages, technology, textiles, leather tanning and real estate.

PWC’s projection association with World Bank Bangladesh’s economywill be the 23rd in the world in terms of GDP at PPP with a value

of USD 3367 billion by 2050.


Towards the Reality

For sustainable economic growth we need to work a lot specially with education sectorand health care sector. Because public expenditure as a percentage of GDP on these twosector accelerate sustainable economic growth.


Towards the Reality (Cont’d)

In Figure 1 and Figure 2, we have presented two scatter-plots involving publicexpenditure on education as a percentage of the GDP and public expenditure onhealth as a percentage of the GDP respectively against Per Capita Income for thelower-middle income countries and upper-middle income countries as per the WorldBank's classification.

The data are the averages for the years between 2010 and 2015 and they are derivedfrom World Bank's data archive. Black line in figure 1 & 2 represent average publicexpenditure as % of GDP on education & health respectively in Lower-middle incomecountries. Green in figure 1 and Violate in figure 2 represent average publicexpenditure as % of GDP on education & health respectively in upper-middle incomecountries.



Red dot in both figure represent Bangladesh’s position. Interestingly in both casesBangladesh appears to be in worst performing countries among the other lower-middle income countries.

If Bangladesh wanted to continue sustainable development the current allocations foreducation and health expenditure as percentage of the GDP need to be almostdoubled from their current levels. The efficiency of the public expenditure oneducation and health in Bangladesh needs to be improved. Otherwise joblessdevelopment will lead Bangladesh to worst position in the long term.


If we consider the macro-economy environment in June’16 inflation declined to5.33% YOY basis. Food inflation in June’16 decreased to 4.8o% which was 29%lower than last year whereas non-food inflation increased to 7.5% which indicatesexpenses on non-food items increased.

Interest rate decline attracts private sector to invest more.

Mega infrastructural projects like Padma bride, metro rail will lead more efficiencyin overall economic activity in coming years.

The balance of payment (BoP) remains comfortable with a large surplus in bothcurrent and financial accounts, due to recovery in export, increased Foreign DirectInvestment and aid disbursements.


So after analyzing the information and overall economy we can say that-

“Bangladesh is Moving Towards Middle income Country”

Ultimate Decision© Riadh Mohammed Arif

Economy & Finance

Bangladesh is moving towards middle income country myth or reality