Bangladesh to become 20th largest economy by 2038

Bangladesh is set to become the world's 20th largest economy by 2038 owing to continued economic growth, according to a forecast by the London-based Centre for Economics and Business Research (CEBR) on Wednesday.

The CEBR forecasts that annual gross domestic product (GDP) growth would accelerate to an average of 6.8 percent between 2023-24 and 2027-28, before slowing to an average of 6.2 percent per year over the subsequent decade.

The next 15 years will see Bangladesh climb rapidly up the rankings of the World Economic League Table (WELT).

The CEBR forecasts that Bangladesh will register a sizeable jump of 17 spots in the table by 2038, up from its current position in the 37th place. Bangladesh will climb three spots by next year and reach 23rd place by 2033, it added.

The CEBR forecast economic growth in 192 countries.

As of 2023, Bangladesh is estimated to have a purchasing power parity (PPP)-adjusted GDP per capita of $8,673 and is classified as a lower-middle-income country.

Following the expansion of the economy by 7.1 percent in 2021-22, growth is expected to have moderated to 6.0 percent in the last fiscal year, leaving output at 25.6 percent above pre-pandemic levels.

The deceleration in growth in 2022-23 was driven by a contraction in industrial activities, primarily driven by subdued export demand from advanced economies.

Sharp depreciation in the local currency, taka, coupled with upward revisions in fuel and energy prices in the domestic market led to a significant rise in production and transportation costs.

This in turn contributed to a rampant increase in consumer prices.

In 2023, inflation is estimated to have reached 9 percent, a considerable uptick on the average inflation rate observed in the ten years leading up to 2021, which stood at 6.3 percent.

In response to inflationary pressures, the Bangladesh Bank has continued to adhere to a tight monetary policy, and increased the policy rate to 6.50 percent.

Notably, there has been a paradigm shift in the overall monetary policy framework over the past year in Bangladesh, transitioning from a monetary targeting framework to an interest rate targeting framework, the CEBR said.

This shift is accompanied by a commitment to a unified market exchange rate, departing from the managed floating exchange rate system that has been in operation since May 2003. This system includes differential rates for exports, imports, and remittances.

These policy changes are linked to the country's participation in the IMF programme initiated at the beginning of the year.

Government debt as a share of GDP rose to an expected 39.4 percent in 2023, up from 37.9 percent in 2022.

The government operated a rather high fiscal deficit in 2023, at an estimated 4.5 percent, facilitated in part by the low debt-to-GDP ratio.

This acted to bolster the economy in the past months, the CEBR said.

The CEBR also said it has recently become commonplace to claim that the world economic outlook has become more uncertain than usual. "Perhaps uncertainty is the new 'normal'. Yet, our short-term global forecasts in recent years have been surprisingly accurate, though our medium-term forecasts were less so," it said.

CEBR also said the US economy was sustaining growth but only at the cost of borrowing and continuing to plan to borrow.

The problems in the Eurozone are similar to those in the US, with the Eurozone position complicated by the fact that the level of political integration within the zone is much less advanced than the level of financial integration.

China's problems are different in type since they originate in the property sector rather than in government. Chinese property developers are sitting on large losses after years of debt-fuelled expansion.

CEBR added that India is set to become the world's third-largest economy by 2032, and will eventually surpass China and the United States to become the "world's largest economic superpower" by the end of this century.