Date: 10 May 2012
The event will be held in Dhaka , Bangladesh , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Mr. Mustafa K. Mujeri
Bangladesh Institute of Development Studies
Mr. Neal Grant Walker
UN Resident Coordinator and UNDP Resident Representative
Mr. Syed Nuruzzaman
Chief, Countries with Special Needs Section
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
Country briefing note <download pdf file>
Strong growth momentum maintained
The economy of Bangladesh has grown steadily over the past five years, averaging 6.2% per annum, despite the adverse effects stemming from the global financial and economic crisis and some major natural disasters.
GDP grew 6.7% in fiscal year 2011 compared to 6.1% in the previous year. All of the sectors of the economy benefited from government initiatives to overcome infrastructural bottlenecks in the power, energy and communication sectors.
Given the brighter prospects for the agricultural and industrial sectors, GDP is projected to grow by 6.6% in 2012. At the same time, growth in domestic demand is expected to be supported by strong remittance inflows.
Inflation remains stubbornly high
In Bangladesh , inflation has been rising since the middle of 2009 due to both domestic and external factors. Rising food and fuel prices in the international market and monetary expansion in the domestic economy exerted upward pressure on inflation in the country. Inflation rose to 8.8% in fiscal year 2011 as compared to 7.3% in the previous year.
Monetary policy has been tightened to contain inflationary pressures. At the same time, well-targeted support programmes such as selected rationing and fair price supply and open market sale of essentials for poor households struggling with high food prices are being pursued by the Government.
Budget deficit remains large and need to be contained
Budget deficits are generally high in countries of South Asia . In Bangladesh , budget deficit rose to 4.4% of GDP in 2011 from 3.7% of GDP in 2010. Also notably, the country's tax to GDP ratio, which crossed the 10% mark in 2011, has been rising in line with growing tax revenues.
Higher tax revenues have been facilitated by reforms in the country's tax policy and administration, which entailed the following: modernization and automation of the tax administration, expansion of the tax net and coverage, reduction of tax exemptions and building awareness in society about paying taxes. The debt financing strategy being pursued by the Government aims to obtain more concessional financing to minimize the cost of debt financing and also avoid crowding out the private sector.
Both exports and imports grow strongly; large remittances also continue to grow
In Bangladesh , the slowdown in export growth to 4.1% in fiscal year 2010 was sharply reversed to 41.5% in fiscal year 2011. Similar to exports, imports also staged a strong recovery, growing by 41.8% in 2011 as compared to 5.5% in 2010.
Workers' remittances have been increasing despite the global financial crisis. However, the rate of growth has been declining as seen in 2011 when it fell to 6% in 2011 as compared to 13.4% in 2010. Due to the widening trade deficit and slower growth in remittances, the current account surplus narrowed in 2011.
The nominal exchange rate depreciated on the back of higher import demand and slower growth in overseas workers' remittances, FDI inflows and external assistance.
Workers' remittances play a major and positive role in the economy
Remittances from overseas workers are quite substantial and play a major role in the South Asian economies. Governments should consider some special and innovative institutional arrangements to protect migrants and provide social protection coverage. In this regard, a commission should be created to put forward a uniform stance of countries in South Asia to oversee migration and enhance its positive aspects.
Once established, the South Asian Migration Commission could formulate the framework for a coherent and comprehensive response to the issues surrounding migration generally applicable to all the countries in South Asia . By looking into best practices regionally and internationally, the Commission could help in designing policies that harness the benefits of migration in the best possible way for all stakeholders and minimize their negative effects.
Severe energy shortages require urgent response
On the physical infrastructure side, several countries in the subregion, such as Pakistan , Nepal and Bangladesh , are facing severe electricity shortages.
To address energy shortages, the following measures must be undertaken urgently: setting up viable new power projects; minimizing transmission and distribution losses, including theft of electricity; increasing exploration of natural gas, crude oil and coal; tapping of regional markets and setting up infrastructure for energy imports; and incentivizing the development of renewable energy resources.
Due to limited public resources, involvement of the private sector should be enhanced and public-private partnerships should be encouraged.
s Widespread poverty continues to be a major long-term development challenge
Widespread poverty continues to be a major challenge in South Asia despite some notable success in reducing it over time. Even today, at least one in every three persons in South Asia is classified as poor.
To fight against poverty, countries need to continue to implement economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population.
To promote more inclusive growth, the provision of basic services, such as health care and education, should remain the principal priority in the policy agendas of all governments. Generating ample employment opportunities are crucial for the poor to earn a livelihood.
Policy brief: Living with high commodity prices <download pdf file>