Research and analysis

Bangladesh Inclusive Growth Diagnostic - June 2014

Analysis of economic growth and poverty reduction over the past decade, identifying the main obstacles faced by investors that affect growth

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The Inclusive Growth Diagnostic identifies the binding constraints that deter households and firms in Bangladsh from making investments and taking risks that would significantly increase their incomes. The analysis is not intended to dictate specific interventions. Instead it provides a framework that will focus attention on the most pressing obstacles to development. From this policy makers may identify appropriate reforms and projects that will ease those binding constraints, stimulating economic growth.

Bangladesh has made remarkable progress over the past two decades, lifting millions out of poverty and sustaining expanding levels of economic growth. These achievements have been realised despite major internal and external challenges, including global economic downturns, natural disasters and periods of political uncertainty. Reaching the government of Bangladesh’s goal of becoming a middle income country by 2021 – the country’s 50th year anniversary – will require annual growth rates of between 7.5 and 8% according to the World Bank. The benefit of this growth must be felt by poor households and women if Bangladesh hopes to raise income levels and end extreme poverty.

Expanding levels of economic growth has led to a rise in Bangladesh’s gross national income (GNI), at 2005 purchasing power parity (PPP). It GNI per capita increased by 79% from $985 in 2000 to $1,768 in 2010. Yet Bangladesh remains a low-income country. In 2010 over 43% of the population lived below the international extreme poverty line of $1.25 per person per day, though this was down from 58% in 2000. To put this in perspective, in the 65 million Bangladeshis living in extreme poverty in 2010 was roughly the same population as the United Kingdom. With a further 50 million living on less than $2.00 per day, it remains vulnerable to external shocks and any adverse fluctuations in income or required spending.

The governments of the United States, the United Kingdom, and other countries, as well as international organisations like the World Bank, have committed themselves to help eradicate extreme poverty by 2030. Assuming no major shocks, continued economic growth at rates similar to those recorded since 2000 could allow Bangladesh to reduce the prevalence of extreme poverty to 2.4% by 2030. That would represent an historic achievement for Bangladesh but would still leave more than half the population living on less than $4 per day. For Bangladeshis to escape from poverty as viewed by citizens of donor countries, it needs sustained and inclusive growth for decades.

Published 19 October 2014