Without massive reforms, Bangladesh’s gross domestic product (GDP) could fall below 4% by 2035 to 2039, says a new World Bank report.
The study found three obstacles to Bangladesh’s economic reforms.
However, Bangladesh has made remarkable economic and development progress in the past five decades and now the country needs a strong reform agenda to sustain its growth trajectory and further accelerate the growth rate in the long term, says report.
“The Country Economic Memorandum – Change of Fabric identifies” formally launched at a city hotel today identified key barriers to higher growth and proposed actionable reforms to maintain rapid growth.
The report urged strong policy reforms in three areas critical to sustain growth: stem the erosion of trade competitiveness, address vulnerabilities in the financial sector, and ensure orderly urbanization process.
World Bank acting country director Dandan Chen gave the opening remarks while Hoon S Soh, practice manager, macroeconomics, trade, investment and public sector, South Asia, World Bank gave the closing remarks.
“Over the past decade, Bangladesh has been among the top 10 fastest growing economies,” said Dandan Chen, World Bank acting country director for Bangladesh and Bhutan.
“But there is no room for complacency. New and emerging challenges—including, advances in technology and climate change—demand new policy and institutional innovations to cater to the changing needs of a growing economy. To achieve its vision of upper middle-income country by 2031, Bangladesh will need strong and transformative policy actions,” she added.
The report envisages export diversification to reduce the risk of export volatility, create new sources of growth, and increase foreign exchange earnings in the long term. The heavy reliance on ready-made garments and Bangladesh’s protective tariff regime inhibits diversified export growth.
Further, with trade competitiveness based on low wages and trade preferences eroding, the country can increase the resilience of economic growth by diversifying its export basket.
Average tariffs in Bangladesh are higher than its comparator countries: the average tariff rate on intermediate goods in Bangladesh is 18.8 percent, which is about twice the rate as in China, Thailand and Vietnam.
Overall trade costs and inefficient border processes are major impediments to trade. Deep and comprehensive trade agreements with the European Union and India covering tariff modernization, increased trade facilitation, and services and invest reforms can respectively boost Bangladesh’s GDP by 0.4 and 0.5 percent and exports by 1.4 and 3.9 percent.
BDST: 1807 HRS, SEP 29, 2022