Faster GDP Growth and Sustained Remittance Growth Needed for Bangladesh to Achieve Middle Income Status by 2021
November 13, 2012
Dhaka, November 13, 2012 – Bangladesh needs to accelerate GDP growth to 7.5-8 percent and sustain 8 percent remittance growth to reach Middle Income Country Status by next decade, says a new World Bank report launched today. According to the report, “Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth-Opportunities and Challenges” (Overview, Main Report) both GDP growth and remittances would play an important role in attaining middle income status.
Withstanding global shocks and natural crisis, Bangladesh’s economy continued to grow at a healthy six percent-plus rate, and is now among the 25 largest developing countries based on gross national income. Steady growth was possible due to a number of factors including population control, macroeconomic stability, rapid development of the financial sector and openness in the economy. Notable success in Bangladesh’s development includes achievement of nearly universal primary education.
“In the past few decades, Bangladesh has demonstrated to the world that it can adapt to the changing demands of a rapidly globalizing economy and also pioneer changes.” said Ellen Goldstein, Country Director, World Bank in Bangladesh. “But Bangladesh needs to do more than business as usual to achieve its aim of middle income status by 2021. Forward looking steps such as ensuring an enabling environment for policy and institutional reforms for private sector growth will be essential. Higher GDP growth can be sustained only if the urban space is well connected, livable, and innovative, which can be achieved by focusing on infrastructure, institutions, and incentives.”
To push up GDP growth per annum from 6 percent to around 7.5-8 percent needed to attain middle income status, the report underscores the importance of increasing investments in physical infrastructure and human development, and enhancing productivity growth and the outward orientation of the economy.
Inadequate infrastructure remains a major bottleneck to growth, which urgently needs to be addressed. To accommodate 2.7 million unemployed and 1.8 million new entrants every year, Bangladesh must create an enabling environment for expansion of labor intensive economic activities. Implementation of policy and institutional reforms to enhance labor productivity and skills is critical.
Along with faster GDP growth, it is also equally important for Bangladesh to sustain 8 percent-plus remittance growth. The contribution of remittances to Gross National Income has grown substantially in the last decade to around 10.5 percent of GDP in 2011. Currently around 14 percent of Bangladeshis work overseas. Bangladesh needs to continue to tap the global migrant market and promote safe migration in order to accelerate growth and reduce poverty at home.
Sustaining growth is subject to handling the challenges posed by unplanned urbanization and climate change. Urbanization offers opportunities to accelerate growth, but it also comes with risks to sustainability if not managed properly. Bangladesh is one of the most vulnerable countries to climate change. The report finds that the direct effect of climate change on growth in the near term is likely to be small. This provides Bangladesh a bit of breathing space to take proactive measures to adapt to the longer term impact of climate change which is expected to be significant.