Last updated: January 2023
Bangladesh has seen some of the highest and longest-sustained rates of growth of an emerging economy in the 21st century, supported by fast expansion in its textiles and services sector. Creditworthiness remains on par with the regional average, but indicators on the business climate and per capita incomes lag most other regional peers.
The above chart is a cobweb diagram showing how a country measures up on four important dimensions of economic performance—per capita income, annual GDP growth, business climate rank and creditworthiness. Per capita income is in current US dollars. Annual GDP growth is the five-year average forecast between 2023 and 2027. Business climate is measured by the World Bank’s 2019 Ease of Doing Business ranking of 190 countries. Creditworthiness attempts to measure a country's ability to honour its external debt obligations and is measured by its OECD country credit risk rating. The chart shows not only how a country performs on the four dimensions, but how it measures up against other countries in the region.
Even in times of global uncertainty, Bangladesh’s economy has continued to grow and develop. Real GDP growth picked up to 7.2% in 2022 from 6.9% in 2021, driven by extensive stimulus measures boosting the manufacturing and services sectors (retail, transport, and hospitality). On the downside, widespread flooding hit the agricultural sector in 2022.
The IMF estimates growth of 6% in 2023. Ongoing solid demand for ready-made garment exports and a weaker Bangladeshi taka will support the competitiveness of the country’s key clothing exports. But rising commodity prices that are boosting the import bill and accelerating inflation alongside decreasing remittances and electricity shortages will weigh on growth.
In late 2022, the Bangladesh government requested IMF precautionary funding of US$4.5 billion to preserve macroeconomic stability. The funding will provide affordable and long-term financing to support and catalyse Bangladesh’s climate investment needs and reduce the effect of a surge in imports on economic growth.
Risks to the outlook are significant, including vulnerability to weather events that can hurt the agricultural sector and the potential for even higher global food and energy prices that further squeezes household budgets.
Over the longer term, a youthful population and rising incomes should support greater private consumption. Ongoing investment in human capital, wider access to the internet in rural areas, growing foreign investment and increased participation of women in the labour force will support continued economic and social development. As Bangladesh faces significant climate risks, the country aims to shift towards greener sources of growth—for example, low carbon investments and adoption of climate technologies for livestock and irrigation. If successfully implemented, green energy investments will help support sustainable development over the longer term.
Bangladesh’s strong past economic performance has lifted incomes. The World Bank indicates that climate-smart growth, upskilling the labour force and a competitive business environment is important to achieving upper-middle income status in Bangladesh.
Country risk in Bangladesh is moderate to high. The OECD country credit grade is 5, indicating that there may be a moderate to high chance the country will be unable or unwilling to meet its external debt obligations. This risk rating balances robust growth prospects, a modest government debt burden and a manageable external debt schedule against low per capita incomes, a weak banking sector and governance challenges.
The risk of expropriation in Bangladesh is high. The Foreign Investment Act of 1980 safeguards against government expropriation in Bangladesh without adequate compensation. But a weak judicial system and corruption can make it difficult for foreign investors to seek impartial arbitration.
Political risk is moderate to high in Bangladesh. Rivalries within and between political parties often results in local violence. Related to this, Worldwide Governance indicators show Bangladesh is well below the regional average for political stability and absence of violence, and lower on all other indicators of governance.
Bangladesh was Australia’s 31st largest trading partner in 2021. Total goods and services trade amounted to $3 billion in 2021. Two-way trade between Bangladesh and Australia grew at an average of 11% over the last decade to 2021. Major goods exports to Bangladesh in 2021 included vegetables, education-related travel, ferrous waste and scrap, and wheat. Major goods imported from Bangladesh include textiles and clothing.
Services contributed $329 million to total export receipts in 2021 (about 26% of total exports), in large part supported by ongoing Bangladesh demand for Australian education and facilitated by remote learning. This trend continued in 2022.
Tourist arrivals, which had been rising before the pandemic, fell during 2020-21 due to international border restrictions. As border restrictions eased, Bangladesh tourism arrivals recovered in 2022. Another year of open international borders and pent-up demand for travel should support further recovery in tourism, and broader services exports, in 2023.
Australian investment in Bangladesh is small, at $324 million in 2021. Increasing demand for healthy, high-quality food and beverages in Bangladesh due to a growing population and rising middle-class offers strong opportunities for Australian exporters of dairy, citrus, and grain. Bangladeshi investment in Australia is very small.
Department of Foreign Affairs and Trade
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