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Macro Economic Indicators Of Bangladesh Economy

3116 words - 13 pages

Macro economic indicators of Bangladesh economy

Introduction

The Bangladesh economy has experienced both macro-economic stability and robust economic growth following the transition to a democratic rule in the early of 1990s. In the backdrop of the deep macro-economic crisis of the late 1980s, a series of stabilization measures were introduced in the Bangladesh economy which largely restored macro-economic stability in the early 1990s.
Economic growth in Bangladesh averaged 6.3 percent during financial year (FY) 04-07. The economy has once again proved its resilience in achieving stronger than expected growth despite having to contend with the adverse effects of unfavorable weather ...view middle of the document...

In the 1990s, the growth momentum was higher during the second half of the decade in comparison to the first half: average growth rates were 4.4 per cent (FY91-95) and 5.2 per cent (FY96-00).

Growth Performance since Independence: An Overview

This section provides a brief overview of the growth performance of the Bangladesh economy and analyzes the sources of growth using the growth accounting framework. The broad objective is to understand the nature of economic growth achieved by the country in the backdrop of one of the most vulnerable economies in the world with extremely high population density, low resource base, high incidence of natural disasters, and persistent political instability. After independence in 1971, the country inherited a war-ravaged economy with the daunting challenge of reconstruction and recovery from the
devastation of the Liberation War. Notwithstanding these initial difficulties the real per capita income of the people has nearly doubled over the last three decades. This has been accompanied by impressive human development with the Human Development Index (HDI) value rising from 0.20 in 1970 to 0.49 in 1997, while the incidence of income poverty has been reduced by about a quarter (BIDS 2001). Yet, the development challenges remain formidable in view of the low per capita income of US $ 370 along with 50 per cent of the population living below the poverty line in 2000 and low global ranking in terms of most human development indicators.

Savings
Bangladesh has one of the lowest domestic savings rates among the developing countries in general and South Asian countries in particulars. Bangladesh's domestic savings performance in the early 1990s was in fact paralleled the budgetary performance. The national savings rate was more or less stagnated in the first period of 1990s, which represents a reversal of the macroeconomic gains of that period. But the domestic savings rates were more remarkable in that period. In FY91, the domestic savings rate was 18.23 per cent of GDP which was much higher than the average growth rate of the same period (14.12 per cent). The possible reasons responsible for that scenario were weakening efforts for mobilization of public sector resources and import liberalization, in the absence of a strengthening of domestic tax efforts after FY91.
The savings rate both domestic and national showed an increasing trend in the latter period of 1990s compared to its previous period, although it did not show any drastic change. The domestic savings rate is stagnated for last couple of years. In FY01 it was 18.00 per cent, stagnates at 18.27 per cent in FY04. On the other hand, the national savings rate also increased marginally from 22.41 per cent in FY01 to 22.49 per cent in FY04. The marginal increase of the latter is underpinned by increasing flow of foreign remittances from the expatriate Bangladeshi workers. The prolonged stagnation of the domestic savings may be largely explained by the...

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