In 2002, Bangladesh was still one of the relatively poor countries of the world. However, it is the eighth largest county in the world in terms of population, and currently, it has one of the highest economic growth rates amongst the poor countries. This means it is making very good progress in reducing poverty and moving up the ladder in terms of relative prosperity. Let’s discuss economic growth in Bangladesh.
Economic growth in Bangladesh compared to its neighbors?
The relative prosperity of Bangladesh compared to its neighbors can be seen in the following table comparing the per capita incomes in US dollars of a number of Asian countries.
What is per capita income?
The per capita income is the average income of a country, which is obtained by taking its gross national income is US dollars and dividing it by the total population.
It is a rough indicator of the relative prosperity of a country, but it is not a perfect measure. This is because it does not tell us how incomes are distribute4d within the country. Two countries with the same per capita income may have very different levels of poverty because income may be distributed much more unevenly in one compared to the other.
A second problem is that the comparison of per capita incomes in US dollars in very sensitive to changes in the exchange rates of local currencies with the US dollar.
Keeping these problems in mind, the per capita incomes can nevertheless give us some broad indication of the relative prosperity of countries.
How fast is its growth compared to other countries?
While Bangladesh is still a low-income country, it has achieved a relatively high rate of growth in the last decade and this has meant that it is moving up in terms of relative prosperity. The relative growth rates of the same group of countries are shown in the figure.
Since growth rates have a compound effect, small differences in growth rates can result in large differences in living standards over a few decades.
Bangladesh has enjoyed a relatively high growth rate in the decade since 1990. Its growth rate in the Indian subcontinent has been higher than Pakistan, Nepal, and Sri Lanka, and only lower than India. It has also had a higher growth rate than in most African countries.
But China has left all the countries of the Indian subcontinent behind with its growth rates near the 10 percent mark for the last two decades, and this explains why China’s per capita income has shot up recently, to more than double the average of the Indian subcontinent.
In earlier decades when Malaysia and Thailand were catching up with the advanced countries, their growth rates too were close to 10 percent per year.
If Bangladesh is to catch up with the standard of living already achieved by Thailand, Malaysia, and China, it will have to double its growth rate from around 5 percent of GDP per year to frond 10 per year.
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