Bangladesh

Macro-economic Analysis
Gross Domestic Product (GDP):

Bangladesh’s GDP is estimated to grow by

5.3% in FY2023. Ascribable to feeble
export expansion and moderate domestic
demand are the two prominent reasons
behind GDP growth. It is prognosticated
that the current account deficit would
decrease from 4.1% of GDP in FY2022 to
1.6% of GDP in FY2023 ascribable to the
import restriction are moderate and
remittances enlargement.

(https://www.adb.org/news/bangladesh-economy-grow-moderately-amid-global-economic-
slowdown)

Inflation Rate of Bangladesh:

Annual inflation rate in Bangladesh

imperceptive slightly to 9.69% in July 2023
from 9.74%. Embarking on 2023, the cost
of a product which was 100BDT back in
1987 now cost around 889.06 BDT. The
average inflation over 35 years is 6.5%.

(https://www.worlddata.info/asia/bangladesh/inflation-rates.php)

Unemployment rate: The unemployment

rate has increased to 2.59 million till now
in 2023, from 2.32 million in 2022, this is
being confiscated from the Bangladesh
Bureau of Statistics (BBS). Back in 2022,
the unemployment rate declined to 3.6%
assignable to an enlarged involvement of
women as well as youth.

Trade Balance: According to statistics from

the Bangladesh Bank, the tightening of import
controls has caused Bangladesh's trade deficit
to drop to -$17,155 million in fiscal year 2022–
2023 from –$33,250 million in the previous
fiscal year. (https://www.tbsnews.net/economy/bangladeshs-trade-deficit-shrinks-48-fy23-
676354)

Financial Sector Performance

Banking sector: Poor capital market, lack of governance, corruption, mismanagement are the foremost
causes of the plagued banking sector leading towards a lower position which is quietly known as a culture
of impunity. To mobilize savings as well as to come up with crediting to the private sector limits the
political encroaching and non-performing loans. Consequently, the risk of insolvency leads a negative
impact on the banking. The Bangladesh Bank is basically the regulatory body for the banking
sector because of implementing and formulating the monetary policy.
(https://thefinancialexpress.com.bd/views/major-challenges-for-bangladesh-economy-in-
2023-1675265560)
Stock Exchange: Bangladesh Securities and Exchange Commission (BSEC) regulates the Dhaka
Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) to accumulate the capital
market in Bangladesh. Back in March 2023 the broad index of the DSE & CSE were 0.90% as
well as 0.89% which is quite higher. Total turnover value that has been traded securities of DSE
was 9.46%, whereas the total over of CSE was 57.45% which indicates the lower ones . For
modulating the stock exchange as well as the security market the BSEC is indicating the
regulatory body.

(https://www.bb.org.bd/pub/monthly/capital_market/report%20april-23.pdf )

Political and Regulatory Environment

Government Stability: Bangladesh has hardly enjoyed political stability in its entire history.
Political situation in Bangladesh tends to be more volatile when the country gets close to the
general election. Violent and destructive tactics have been utilized by both the major two
political parties Awami League and BNP (Bangladesh National Party) lack mutual respect.
Above it, factionalism is seen inside the current ruling party Awami and for which they have
been struggling to effectively manage conflicts within their party. Public's trust on the political
party’s to effectively handle the system has moved to even lower than ever. Despite all these
problems, Bangladesh’s government has managed to pull out some major economic
improvements relating to economic growth, unemployment rates and poverty levels but still lack
transparency seen within the Bangladesh Government.
(https://thedailynewnation.com/news/330390/Political-instability-and-Bangladesh/)

Policies related to foreign investment : Bangladesh has been actively seeking foreign
investment. According to Bangladesh Bank, Foreign Investors are free to make any kind of
investment in Bangladesh of their choice of enterprises except some reserved sectors. There is no
need for any kind of permission from the Bangladesh Bank or Bangladesh Investment
Development Authority (BIDA) if the investors or entrepreneurs use their own funds. However,
registration in BIDA is necessary in order to avail any kind of facilities or institutional support
provided by the government. (https://juralacuity.com/protection-of-foreign-investments-in-
bangladesh-laws-policy/)
Regulatory Environment: Bangladesh Security and Exchange Commission (BSEC) is placed in
order to protect the investors interest. BSEC is solely responsible to develop and keep a stable
security market for the investors in order to protect their interest. According to BSEC:
 They work to protect the interest of the investors.
 Work for continuous development of the market.
 Responsible for formulating the rules on security related matters or any related topics.

Investment Opportunities
Garment And Textiles:

Bangladesh’s RMG sector has experienced

an average growth of 15% in the last two
decades where it was 9.09% growth in the
July-April Period of the current fiscal year
(2022-2023). Bangladesh has been the
largest garment exporter with 84% of
Bangladesh exports. Bangladesh has
changed its RMG sector from tragedy to
transformation and putting a closer look in
transparency regarding factory safety and
value-chain responsibility. The growing
trend in the RMG sectors is lucrative for foreign investors to invest in Bangladesh.

Sector Highlights:
1. Extensive market possibilities with 6.4% global market share with a growth rate of 5.1%,
5.9% and 6.4% in the past three years
2. Cheap Labor and plentiful compared to other companies.
3. Reduced income tax on RMG manufacturers
4. Duty benefit for export
5. Powerful forward and reverse connection for purchasing raw materials.
(https://en.prothomalo.com/business/local/2c6m6b8ko1#:~:text=Bangladesh's%20total%20RMG
%20exports%20has,(EPB)%2C%20reports%20BSS) . (https://www.linkedin.com/pulse/10-reasons-invest-
bangladesh-apparel-industry-thetextilenetwork/) (https://www.mckinsey.com/industries/retail/our-
insights/whats-next-for-bangladeshs-garment-industry-after-a-decade-of-growth)
 Risk Analysis
Currency Risk: Trade deficit of Bangladesh
is steadily increasing which is putting
pressure on the foreign reserve ultimately
depreciating the currency.

Political Risk: Political situation in

Bangladesh is extremely volatile with two major parties lacking mutual respect. Failure of
creating a transparent system is also seen in the ruling party’s activity for which destructive
movements are common in Bangladesh.

Legal Risk: In Bangladesh, the legal system has some serious issues as the framework is not
quite developed and maintained as like other countries. And on top of that, political instability
makes it even worse. Currently several legal risks that are mostly seen in Bangladesh are judicial
independence, basic human rights, freedom of speech, environmental issues, political belief and
stability. (https://www.thedailystar.net/country/31-million-face-legal-issues-every-year-bangladesh-
1573870)

Market Volatility: Bangladesh Stock market has

been extremely volatile. The DSE stock index for
the last 5 years shows how the stock market
fluctuated.

Mitigation Strategy: Despite having such risks associated with investing in Bangladesh some
strategy can be applied to mitigate the risk. An investor can:

1. Diversify their investment: Diversification strategy can be used to mitigate the risk
associated with one sector. It will allow the investor to create a portfolio of investment
that minimizes the risk associated with his investment.
2. Investment in high performed sectors : Investing in the sectors which are growing and
have a good track record can lower the risk. High performed sectors are less likely to be
affected by risk factors.
3. Investment for a long term: Since, Bangladesh’s market is highly volatile in the short
run but a relatively upward trend in the long run, investors can use this strategy to avoid
the short-term fluctuations which will minimize their risk.