Bangladesh has rapidly grown over the past decades. They have outshined many of the world’s leading developing economies. Data from the International Monetary Fund (IMF) shows that Bangladesh’s gross domestic product (GDP) stood at only 61 billion US dollars. Their GDP per capita was only 483 dollars. In 2023, however, Bangladesh’s GDP per capita would grow to over 2,620 dollars which puts their per capita higher than India and Pakistan. Their GDP is also now estimated to be 446 billion dollars. Many observers, economists and lawmakers are now projecting Bangladesh to become the next trillion dollar economy. How are they going to become a one trillion dollar economy? Well, that’s what we are going to discuss in today’s video.
Let’s first talk about the feasibility of being a one trillion dollar economy. A study published by the Boston Consulting Group (BCG) said that over the period between 2016 to 2021, Bangladesh emerged to outpace major Asian peers such as India, Indonesia, Vietnam, the Philippines, and Thailand. Bangladesh grew at a rate of 6.4 percent during this five-year period. This is above Vietnam’s growth rate of 5.4 percent, India’s growth rate of 3.9 percent, Indonesia at 3.4 percent, the Philippines at 3.1 percent and the world growth rate of 2.9 percent.
The BCG report said that a significant driver to become a trillion dollar economy for Bangladesh is its domestic consumer market.
These consumer markets will drive consumption. Bangladesh’s GDP relies heavily on household consumption, which accounted for approximately 69 percent of the GDP in 2021. What is consumption? It is the action of using up a resource or purchasing goods and services for use by individuals or households. In economic terms, consumption represents the end of the production process and the primary driver of economic activity. When individuals or households consume goods and services, they create demand, which in turn stimulates production, employment, and investment.
A HSBC report said that Bangladesh is expected to be the fastest-growing consumer market globally over the next decade, emerging as the ninth-largest consumer market by 2030. This growth will surpass established markets like the UK and Germany, and high-growth peers such as Vietnam and Thailand. The surge in the middle and affluent class (MAC) population is a major driver of this demand. According to a 2015 BCG study, the MAC population was expected to grow from around 12 million in 2015 to approximately 19 million by 2020, and reach about 34 million by 2025, making up 17% of the overall population.
Another essential piece to the trillion dollar story is the country’s Young, Growing Workforce. Bangladesh boasts a young workforce ready to create value in this high-growth landscape. The median age in Bangladesh is 28 years, younger than Indonesia (31), India (29), Thailand (39), Vietnam (32), and the global average of 30 years. Over two-thirds (68.4 percent) of the population is of working age, with 114 million working-age citizens ready to contribute to the economy.
Finally, Bangladeshi households are financially resilient due to high savings and low national debt. The nation’s high savings rate averages more than a third (34 percent) of GNI, compared to the global savings rate of 27 percent. Household consumption, making up about 69 percent of GDP, shields the economy from external shocks. Bangladesh’s national debt levels are low compared to other Asian peers, standing at just 19 percent of GDP, in contrast to 39 percent in Vietnam, 41 percent in Indonesia, 53 percent in Thailand, 56 percent in India, and 61 percent in the Philippines.
Let’s break this down further. Having a high savings simply means that a significant portion of the national income is being set aside for future use rather than being spent immediately. This creates a buffer that can absorb economic shocks, whether they arise from global financial instability, natural disasters, or domestic economic disruptions. In practical terms, it means that individuals and businesses are better positioned to weather periods of economic difficulty without drastically reducing their consumption or investment.
High household savings rates contribute to the availability of domestic capital, which can be utilized for investments in infrastructure, education, and healthcare. These investments are crucial for long-term economic growth and development. Furthermore, high savings rates can lead to lower dependency on foreign capital, reducing vulnerability to external financial crises and ensuring greater economic stability.
Low national debt also plays a crucial role in Bangladesh’s financial resilience. With national debt levels at just 19 percent of GDP, the country has greater fiscal space to respond to economic downturns or to invest in development projects without the burden of high interest payments. This low debt level means that the government can allocate more resources to vital public services and infrastructure projects, further stimulating economic growth.
In contrast, countries with higher national debt levels often have to dedicate a significant portion of their budgets to debt servicing, which can limit their ability to invest in growth-promoting activities. This situation can create a vicious cycle where high debt levels lead to slower growth, which in turn makes it harder to reduce debt. Bangladesh’s prudent fiscal management has enabled it to avoid this trap, maintaining a sustainable debt level that supports economic stability and growth.
The BCG further said that the Bangladesh government is also helping the economy thrive. The government’s public spending has more than quadrupled from 532 billion Bangladeshi takas in 2012 to 2,254 billion takas by 2022.
Then, another important player is Bangladesh’s dynamic private sector. The country is a key player in the global textile and apparel supply chain, with domestic companies expanding their global presence. The telecom industry, led by GrameenPhone, Robi, and Banglalink, has positioned Bangladesh as the ninth-largest mobile market in the world.
The Bangladesh startup ecosystem has flourished over the past decade, with more than 1,200 active startups focusing on sectors such as FinTech, logistics, mobility, and e-commerce. bKash, the nation’s first unicorn, achieved significant success with SoftBank acquiring a 20 percent stake in November 2021. Other startups like ShopUp, ChalDal, and Pathao are also on the path to unicorn status, reflecting robust growth. The startup industry has raised over $700 million, with government support through the ICT Division’s flagship venture capital fund, Startup Bangladesh.
Other sectors are making their mark on the global stage, with companies like PRAN-RFL expanding in Africa and the Middle East, and pharmaceutical firms like Renata entering markets in Europe, the UK, and the US. Notable local companies, including Square Pharmaceuticals and Fortune Shoes, have been recognized in the Forbes list for the Asia Pacific region for their exceptional corporate performance.
There are also global growth companies from Bangladesh. The most dominant one is Walton. They operate in the Electrical & Electronics (E&E) market, and are now expanding globally. By acquiring three European brands with trademark rights in 57 countries, Walton is positioning itself for international growth. The company plans to establish a contract manufacturing arm in Mexico to access the US market, further solidifying its global footprint.
Finally, to fuel the country’s corporate industry. They must learn how to leverage more debt to grow. Currently, Bangladesh’s corporate sector is primarily fueled by private capital and self-funding, with Emerging Champions focusing on private investments rather than raising funds through capital markets. Unlike global counterparts, Bangladeshi firms have lower debt levels, with 42 percent of public companies having a debt-to-capital ratio below 20 percent, compared to the S&P 1200 median of 42 percent. This conservative approach presents an opportunity for Bangladeshi firms to leverage more debt to drive growth.
Now, we want to finally understand when Bangladesh will become a trillion dollar economy. Well, it all depends on the growth rate that the country has every year. The BCG report projects that if Bangladesh were to have an annual GDP growth rate of 10 percent, they would immediately reach the one trillion dollar economy by approximately 2031. But 10 percent is a high barrier. With a 5 percent growth rate, however, the economy will become a trillion dollar economy before 2040. A modest 5 percent growth is attainable, considering the country’s numerous opportunities available.
Now, let’s talk about the challenges. Are there any challenges that can halt Bangladesh’s growth rate? Well, there aren’t really any significant barriers to their growth. The country’s debt is still relatively small. On top of that, there are huge amounts of foreign investments flowing into the country. This gives them a confidence laid out by the international community, as well as, an inflow in foreign currencies which further bolsters its reserve system that can keep debt issues away.
The only challenge that can stop or halt Bangladesh’s advance is arguably the government. If the government fails to deliver its citizens, either through corruption or other means, then the economy may stall or slow down unexpectedly.