The Fragility of Bangladesh’s Economy: A Rapid Expedition


This brief is prepared by Ahmad Tousif Jami (Research Associate, YPF), Wahib Mohammad (Creative Lead, YPF), and vetted by Dr. Mohammad Tarikul Islam (YPF Senior Fellow, Local Economic Development). For more information, please contact either or

Study Objectives and Method

This brief titled “Fragility of Bangladesh’s Economy” is designed to critically explore the Bangladeshi national economy’s current scene to find significant challenges as well as to suggest the best way forward for overcoming the fragility of the economy amidst the COVID-19 pandemic. Bangladesh is the fastest growing economy in Asia. The staggering growth of the national economy can lead to Bangladesh becoming the 25th largest economy globally in the next 15 years. Bangladesh has also qualified for LDC (Least Developed Country) exit by 2026, meaning Bangladesh is officially recognized as a developing country. Understanding our economies’ challenges and limitations can be fruitful to secure Bangladesh’s developing momentum. Given the situation, the brief is prepared in a review article format, based upon national (i.e., The Daily Star) and international reports (i.e., World Bank).

Major Findings

The rapid expedition found many areas that needed to utilize necessary scope for improvement. The most significant and concurrent essential six findings are listed below.

Class exploitation

Ranging from underpayment and unwarranted working hours to menacing and derogatory working conditions that even lead to physical and verbal abuse, class exploitation in Bangladesh reaches unacceptable instances even in moderate situations. For instance, the minimum monthly wage of a worker in Bangladesh is as low as 8,000 BDT (~94 USD). In contrast, a worker’s minimum monthly wage in China is 1810 CYN (~275 USD). Bangladeshi workers are paid significantly less compared to their manufacturing competitors. While a low minimum wage allows Bangladesh to offer competitive labor prices and create more jobs, this puts them in a cycle of poverty, and overall human development is not inclining. The exploited class continues to produce wealth for the exploited class to expropriate in Bangladesh.

Challenging climate condition

According to the climate change index 2017, Bangladesh is the 6th most climate change-affected country. Livelihood, food security, health, and well-being in many parts of Bangladesh are threatened by climate change. It drastically hampers economic growth too. The Asian Development Bank estimated that Bangladesh might experience a 2% GDP loss annually by 2050 because of climate change. Climate change impacts are a big challenge for the private sector, especially Micro, Small, and Medium Enterprises (MSME), contributing almost half of the GDP. Climate change has the most impact on the agriculture sector and manufacturing sector. Bangladesh’s economy is still based on it as two-thirds of rural people and 87% of rural households rely on agriculture as their income source. Recently it has become difficult to grow crops, especially in coastal areas, because of salinity intrusion. Also, riverbank erosion can endanger inland water transport, which is 50% of inter-district transportation. Overall, it is clear that climate change is a big challenge to Bangladesh’s economy.

Gender disparity

The World Economic Forum Index states that Bangladesh is leading the entire Asian region regarding female work participation. 80% of the workforce of the RMG sector of Bangladesh is mainly female. Despite that, the inequality in work is increasing day by day. According to the 2017-18 Global Gender Gap report, Bangladesh is falling behind in female participation in essential posts. 89.3% of these posts are held by males, where females hold a mere 10.7% posts. Women are also paid less than men in Bangladesh. Furthermore, 70% of Bangladeshi women do not have property enlistment, which does not let them be economically solvent and free but dependent on males. This shows that gender disparity is a barrier in Bangladesh’s economy.

Scarcity of FDI

FDI (Foreign Direct Investment) can be the breeze Bangladesh needs with global value chains in potential sectors. Realistic, transparent, and effective implementation of FDI strategies and policies remains a persisting barrier. Bangladesh had only a 0.4% growth of FDI in the nominal GDP in 2020. This growth comes from the base of only 0.6% net FDI inflows in the GDP. Both the expansion and total intake are significantly lower than other developing countries. For example, Vietnam (A country in the middle of the FDI growth curve) had a 6.2% growth of FDI in the nominal GDP in 2019. This suggests Bangladesh is lagging in attracting adequate FDI.

Undiversified economy

The secret key to a more stable path of equitable growth and development is economic diversification. The Bangladeshi economy is primarily dependent on RMGs. 84% of Bangladesh’s foreign exchange earnings are based solely on Ready Made Garments (World Bank). From 1972-2014, Bangladesh earned 31.2 billion USD by exports, 82% of which was from RMGs. However, the economy is too reliant on RMGs that resilience and stability are difficult to uphold. Potential sectors like jute, cotton, pharmaceutical, etcetera are not adequately subsidized or prioritized yet could help diversity in the economy.

Weak banking sector

Bangladesh’s banking sector is playing an essential role in the economy since the independence of Bangladesh. Nevertheless, challenges like lack of good governance, government influence over Bangladesh Bank, non-performing loans (NPL), and IT risk are making this sector weak. NPL is a paramount concern that is disturbing the financial stability of banks. According to Bangladesh Bank’s data, the number of bad loans increased to 11.23% at the end of the third quarter of 2018. Also, NPLs accounted for 11.45% of total loans in 2019, which was 10.41% in June 2018. As all private banks and their branches are equipped with IT services and moving to a complete IT-dependent banking system, increasing cybersecurity is a big challenge. According to the Bangladesh Institute of Bank Management (BIBM) research, 52% of banks are at high risk of cyberattacks. Bangladesh Bank Cyber Heist, which took place in February 2016, is a recent example of it. Foreign countries also see our banking activities as questionable because of several bouts of fraudulence and malpractices. So, it is clear that Bangladesh’s banking sector has many challenges to overcome its weaknesses.

The Way Forward

As a country recognized by the world as a developing one (as LDC exit is already scheduled by 2026), it is high time Bangladesh prioritized fixing its economy’s loopholes. The world has looked in awe Bangladesh bloomed its economy at a robust pace in the last decade. With a convenient geographical location, skilled workforce, and favorable biodiversity, Bangladesh has many advantages. As a cherry on top, macroeconomic stability stamped by a high growth rate helps for a strong foundation. By focusing on a transparent, concise, bottom-up development approach, localizing SDGs, multi-stakeholder engagement, public-private partnerships, and long-term strategic policies, our economy’s fragilities can be fixed to help create a better future for all of Bangladesh. Moreover, to achieve the vision of becoming a middle-income country by 2021 and a developed country by 2041, Bangladesh must integrate all aspects of climate change into its development planning and delivery of services to the citizens and ecosystems.

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Thumbnail Credit: Dhaka Tribune

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