We know the sky isn’t always blue, but it’s not always cloudy either. Bangladesh’s economy is showing its sunny side. The rising star of South Asia, Bangladesh grabbed the ninth spot among the world’s fastest-growing economies with a projected growth rate of approximately 6.0%, according to Statistics Times (an expert Data Analysis platform) But don’t be deceived by this seemingly modest figure—Bangladesh has quietly emerged as an economic powerhouse, stitching its success story one thread at a time. Quite literally.

Home to over 170 million people, Bangladesh is one of the most densely populated nations on the planet. While such population density might seem like a logistical challenge, it has been the foundation of its flourishing manufacturing sector. Today, Bangladesh is a global leader in textiles and garments, second only to China in apparel exports. Chances are, those affordable shirts or jeans you’re wearing proudly display a “Made in Bangladesh” label. The manufacturing sector contributes over 13.3% to the country’s GDP, with the garment industry alone employing a staggering 4 million workers. This industry accounts for 80% of Bangladesh’s exports, underscoring the critical role international trade plays in driving its economic progress. Of course, the path to prosperity hasn’t been without its challenges. Inflation has been a persistent concern, exceeding 7% earlier this year. Yet, despite rising costs, the economic outlook remains overwhelmingly positive. Growth forecasts highlight expanding industries such as agriculture, pharmaceuticals, and information and communication technology (ICT).

A significant factor behind Bangladesh’s success is its demographic dividend—a youthful and vibrant workforce that forms the backbone of its economy. Coupled with strategic government incentives and a steady influx of foreign investments, the country has fostered an environment ripe for robust business expansion.

Historical Growth and Current Projections

Bangladesh has a strong track record of economic growth and development, even in times of elevated global uncertainty. Since its independence in 1971, the country has witnessed robust economic growth and significant poverty reduction. From being one of the poorest nations at birth, Bangladesh reached lower-middle-income status in 2015 and is on track to graduate from the UN’s Least Developed Countries (LDC) list in 2026. The country aims to become an upper-middle-income country by 2031 and a developed, prosperous nation by 2041[5].

However, current projections indicate a slight moderation in growth due to various challenges. According to the Asian Development Bank (ADB), Bangladesh’s GDP expansion moderated to 5.8% in fiscal year 2023 (FY2023) from 7.1% in the previous year. The slowdown hit both industry and services, with growth in industry slowing to 8.4% from 9.9% in FY2022, reflecting reduced export demand and domestic shortages of electricity and fuel[1].

Demographic Dividend and Workforce

One of the key drivers behind Bangladesh’s economic ascent is its demographic dividend. The country boasts a youthful and vibrant workforce, with over 60% of its population under the age of 30. This demographic advantage provides a significant labor force that is both skilled and eager to contribute to the country’s growth. However, the job market for this youthful population is facing challenges. Despite the overall unemployment rate declining between 2016 and 2022, young people, especially urban educated youth and women, face significantly higher unemployment rates and limited job opportunities[4].

Manufacturing and Export Sector

Bangladesh’s economic success is intricately linked to its thriving manufacturing sector, particularly in the textiles and garment industry. The country is now the second-largest exporter of apparel globally, after China. The garment industry alone employs approximately 4 million workers, contributing significantly to the country’s GDP and export revenues. This sector accounts for over 80% of Bangladesh’s exports, highlighting the critical role international trade plays in driving its economic progress[2].

Diversification and Other Sectors

While the garment industry is a cornerstone of Bangladesh’s economy, the country is also making significant strides in other sectors. Agriculture, which employs nearly three-fifths of the workforce, continues to be a vital component of the economy. Efforts to enhance agricultural productivity, such as government support for farmers’ use of subsidized harvesters and modern seeds, are expected to maintain the sector’s trend growth of 3.2%[1].

The pharmaceuticals and information and communication technology (ICT) sectors are also showing promising growth. The pharmaceutical industry has a 12% average annual growth rate and meets 98% of the domestic demand for pharmaceuticals, making Bangladesh almost self-sufficient in medicine production[2].

Economic Resilience and Policy Reforms

Despite facing numerous challenges, including high inflation, balance of payments deficits, and financial sector vulnerabilities, Bangladesh’s economic outlook remains positive. Inflation, driven by high food and energy prices, averaged 9.0% in FY2023 and reached 9.7% in June 2023. However, the government has taken proactive measures to contain it. The implementation of a crawling peg exchange rate system by the Bangladesh Bank is a step towards a market-driven exchange rate system, which has helped narrow the gap between formal and informal exchange rates[1][4].

The World Bank emphasizes the need for urgent and bold reforms to enhance economic and financial governance, improve the business environment, and address job creation challenges. These reforms include diversifying exports beyond the ready-made garment (RMG) sector, resolving financial sector vulnerabilities, making urbanization more sustainable, and strengthening public institutions, including fiscal reforms to generate more domestic revenue for development[3].

Foreign Investment and Remittances

Foreign investment has been a significant booster for Bangladesh’s economy. The country has seen an increase in foreign direct investment (FDI) in various sectors, including manufacturing, energy, and infrastructure. However, the current level of FDI is still very low, adding to the country’s economic challenges[5].

Remittances from abroad have played a crucial role in supporting the economy. Remittances contribute substantially to Bangladesh’s foreign exchange reserves and help in stabilizing the economy during times of external shocks. Despite a decline in remittances due to recent disruptions, they are expected to rebound as global economic conditions improve[4].

Infrastructure Development

Infrastructure development is another area where Bangladesh is making significant strides. The government is investing heavily in mega infrastructure projects, including those in energy and railways. These projects not only create jobs and stimulate economic activity but also improve the overall business environment by enhancing connectivity and reducing logistical costs. For example, the Padma Bridge, a major infrastructure project, has significantly improved transportation links between the western and eastern parts of the country, boosting trade and economic activity[1].

Challenges and the Way Forward

While Bangladesh’s economic achievements are commendable, the country is not immune to challenges. Issues such as overpopulation, poor infrastructure, corruption, political instability, and the impact of climate change continue to pose significant hurdles. The current account deficit, budget deficit, and reliance on indirect taxes are also areas of concern that need to be addressed. The twin deficit problem, where a budget deficit leads to a current account deficit, can make Bangladesh a debtor to the rest of the world and weaken the value of its currency, further aggravating external imbalances[5].

However these can be fixed while continuing its journey becoming one of the world’s top-growing economies. It’s a story of resilience, strategic planning, and hard work. From its dominant position in the global garment industry to its diversification efforts in other sectors, it is well on its way to achieving its aspirations. The country’s commitment to structural reforms, infrastructure development, and attracting foreign investment positions it strongly for future growth. This small nation is proving that it can punch above its weight on the world stage. Whether it’s excelling in textiles or tackling inflationary pressures, Bangladesh is sewing together a future as bright and colourful as its signature garments.

Sources

Asian Development Bank (ADB) [1].
Wikipedia – Economy of Bangladesh [2].
World Bank [3][4].
The Financial Express [5].