Bangladesh’s Economic Challenges: Inflation, Job Opportunities, and Growth
Bangladesh is facing several economic challenges as it recovers from the COVID-19 pandemic. According to the World Bank’s latest update, the country is dealing with high inflation, a balance of payments deficit, and limited job opportunities, especially for women and educated youth. The report highlights that both global and domestic factors are creating a tough economic environment.
Economic Growth and Challenges
Bangladesh’s GDP growth slowed to 5.2% in FY24 due to weak consumption and exports. It is expected to decrease further to 4.0% in FY25 before picking up to 5.5% in FY26. Income inequality is rising, particularly in urban areas, with the Gini index increasing from 0.50 to 0.53 between 2010 and 2022.
Job Market Concerns
Despite a decline in overall unemployment from 2016 to 2022, young people, especially in urban areas, face high unemployment rates. Job creation in large industries like the ready-made garments sector has stagnated. While more jobs were created in Dhaka, regions like Chattogram, Rajshahi, and Sylhet experienced job losses.
Inflation and Fiscal Policies
Inflation, driven by high food and energy prices, averaged 9.7% in FY24. It spiked in July but moderated in August. The fiscal deficit slightly decreased to 4.5% of GDP in FY24 and is expected to stay within the government’s target of 4.3% in FY25. The current account deficit improved due to reduced imports and strong remittances.
Banking Sector and Reforms
The banking sector is facing tight liquidity and high non-performing loans. Bangladesh Bank has prioritized restoring stability and managing inflation. In May 2024, a new exchange rate system was implemented to move towards a market-driven rate, narrowing the gap between formal and informal rates.
World Bank officials, including Abdoulaye Seck and Dhruv Sharma, emphasize the need for urgent reforms to enhance economic governance and improve the business environment to ensure sustainable growth and job creation.
Doubts Revealed
Bangladesh -: Bangladesh is a country in South Asia, located to the east of India. It is known for its rich culture and history.
Inflation -: Inflation is when the prices of goods and services increase over time, making things more expensive for people to buy.
Balance of payments deficit -: A balance of payments deficit means that a country is spending more money on imports and other expenses than it is earning from exports and other income sources.
World Bank -: The World Bank is an international organization that provides financial and technical assistance to countries around the world to help them improve their economies and reduce poverty.
GDP growth -: GDP growth refers to the increase in the value of all goods and services produced in a country over a certain period, usually a year. It is a measure of economic health.
FY24 -: FY24 stands for Fiscal Year 2024, which is a one-year period that governments and businesses use for accounting and budget purposes. It may not align with the calendar year.
Income inequality -: Income inequality means that there is a big difference in the amount of money earned by different people in a country, with some people earning a lot more than others.
Fiscal deficit -: A fiscal deficit occurs when a government spends more money than it earns from taxes and other sources, leading to borrowing or debt.
Liquidity issues -: Liquidity issues in banking mean that banks do not have enough cash or easily sellable assets to meet their short-term financial obligations.