Introduction:

Bangladesh is a developing country with a rapidly growing market-based economy which

suffers a lot due to imbalance of supply and demand in various sectors most of the time.

Although we are one of the leading exporters of many goods and services like- RMG, fish

etc. our economy has to struggle a lot all the time due to many obstacles like- political

instability, corruption, lack of infrastructure, poor governance etc.

The main objective of this report is to make an assessment of the condition of Bangladesh

economy during October-December, 2013 period (last quarter of the calendar year 2013)

through selecting four macro-economic aggregates and analyzing those data comparing to the

data of same period of 2012. Macro-aggregates are those indicators which relate to the

overall economy like- national income, inflation, exchange rate, export, import, remittance,

money supply etc.

I have selected Inflation, Exchange rate, Import and Export for this report and tried to find

out the growth trend and changes over the reference period (October-December, 2013)

against the same period of the previous year along with the possible causes of behind those

changes and how those might influence the overall economic condition of the country.

Inflation:

Inflation is the sustained rise in the cost of living which is measured with consumer price

index. Consumer Price Index (CPI) is calculated using base year’s quantity as the weight to

compare the value of the base year’s consumption basket with the value of the same basket in

the current year. It is also known as the Laspeyer’s price index. The data collected and

represented here of the rate of inflation are based on CPI with 2005-06 as the base year-

Rate of Inflation (as measured by

CPI, base 2005-06)

2012-13 2013-14

October, 2012

November, 2012

December, 2012

October, 2013

November, 2013

December, 2013

Point to point 5.86% 6.55% 7.14% 7.03% 7.15% 7.35%Monthly Avg.

(12 Month)6.51% 6.25% 6.22% 7.47% 7.51% 7.53%

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Source: BBS (Bangladesh Bureau of Statistics)

October November December0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

5.86%6.55%

7.14%7.03% 7.15% 7.35%

Rate of Inflation (Point to Point)

2012-13 2013-14

October November December0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

6.51% 6.25% 6.22%

7.47% 7.51% 7.53%

Rate of Inflation (Monthly Average)

2012-13 2013-14

Comparing the last quarter inflation data of 2013 with the same quarter data of 2012 in

Bangladesh, it is seen that there is significant increase in the inflation rate both in point-to-

point and monthly average measure in 2013. Regarding point-to-point inflation rate, in both

October & November, 2013 it had a quite noticeable rise (7.03% & 7.15%) comparing to

same period of 2012 (5.86% & 6.55%) whereas in December, 2013 the rise was little bit less

like from 7.14% of December, 2012 to 7.35%. As far as the monthly average measure of

inflation rate is concerned, it has also seen a rising trend over the reference period like- from

2012 (6.51%, 6.25% & 6.22% respectively) to 2013 (7.47%, 7.51% & 7.53% respectively).

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Also the overall inflation rate situation of October-December, 2013 has observed an upward

curve starting from 7.47% to 7.53% (monthly avg.) and 7.03% to 7.35% (point-to-point).

Exchange Rate:

Exchange rate is the rate at which the currency of one country is traded for the currency of

another. It can either mean the price of the foreign currency in terms of the local currency or

vice-versa. In Bangladesh, usually for calculating exchange rate our local currency Tk. is

measured against USD ($). For example, if the exchange rate is Tk.62/$, it means $1 can be

traded for Tk.62 & similarly it also refers that the exchange rate is $1/62 = 0.016/Tk which

means that Tk.1 can be traded for $0.016. The exchange rate is supposed to be determined by

the demand and supply for foreign currency and the term depreciation and appreciation are

used to describe the changes in the exchange rate resulting from changes in the foreign

exchange market.

Exchange Rate (Tk. per USD)

2012-2013 2013-2014Month Avg. Month End Month Avg. Month End

October 81.3123 81.2005 77.7506 77.75November 81.454 81.3811 77.7509 77.754December 80.5349 79.7521 77.751 77.75

Source: Statistics Department & MPD, BB. Note: 2/ Exchange rate represent the mid-value

of buying and selling rates.

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October November December75

76

77

78

79

80

81

8281.3123 81.454

80.5349

77.7506 77.7509 77.751

Exchange Rate (Month Avg_tk/$)

2012-20132013-2014

October

November

December

75 76 77 78 79 80 81 82

81.2005

81.3811

79.7521

77.75

77.754

77.75

Exchange Rate (Month End_tk/$)

2013-20142012-2013

Looking at the exchange rate situation of last quarter of 2013 compared to the same period of

2012, it can be noticed that the exchange rate was quite stable over the reference period at

77.75tk/$ (approximately) both for monthly average and month end measure. In the overall

situation, from October-December, 2012 to October-December, 2013 the exchange rate of

Taka against USD has decreased noticeably approximately from tk.81 to tk.77 which is a

good indicator for the economy as the value of Taka appreciates referring to the price of USD

to be reduced.

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Import:

Import refers to any goods or services brought into one country from another which forms the

backbone of international trade together with export. The higher the value of imports entering

a country, compared to the value of exports, the more negative that country's balance of trade

becomes. Countries are most likely to import goods or services that domestic industries

cannot produce as efficiently or cheaply, but may also import raw materials or commodities

that are not available within its borders.

Import (In million USD)

Import payments (c&f)

Import LCs settlement

Import LCs opened

2012-13 2013-14 2012-13 2013-142012-

132013-

14October 2626.5 3135.14 2652.65 2816.85 2776.98 2873.76

November 2924.7 3267.8 2629.78 2899.77 2741.74 2977.02December 2569.6 3338.1 2603.72 3249.29 2854.11 3355.22

Total 8120.8 9741.04 7886.15 8965.91 8372.83 9206

Source: Statistics Department, Foreign Exchange Operations Department, BB

October November December0

500

1000

1500

2000

2500

3000

3500

4000

2626.52924.7

2569.6

3135.14 3267.8 3338.1

Import payments (c&f) (in million $)

2012-20132013-2014

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October

November

December

0 500 1000 1500 2000 2500 3000 3500

2652.65

2629.78

2603.72

2816.85

2899.77

3249.29

Import LCs settlement (in million $)

2013-2014 2012-2013

October November December0

500

1000

1500

2000

2500

3000

3500

2776.98 2741.74 2854.112873.76 2977.02

3355.22

Import LCs opened (in million $)

2012-20132013-2014

In the last quarter of 2013, the overall growth of import payments (c&f) was higher

comparing to the same period of 2012. The condition of LC settlements & new LC openings

is also similar which refers that the overall import condition of this reference period actually

improved than the same of previous year as import payments (c&f), the main measure of

import which refers to the amount of money paid for overall goods and services imported in

an economy have increased significantly from $8120.8 million in October-December, 2012 to

$9741.04 million in October-December, 2013. Similarly the LC settlements (from $7886.15m

to $8965.91m) and new LC openings (from $8372.83m to $9206m) have also risen

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comparing between those selected time periods. It means that during the reference period,

Bangladesh has faced an increase in terms of overall import as part of international trade.

Export:

Export refers to selling goods and services produced in the home country to other markets.

The sale of such goods adds to the producing nation's gross output. If used for trade, exports

are exchanged for other products or services. Exports are one of the oldest forms of economic

transfer, and occur on a large scale between nations that have fewer restrictions on trade, such

as tariffs or subsidies. It is a function of international trade whereby goods and services

produced in one country are shipped to another country for future sale or trade.

Export (In million $) 2012-2013 2013-2014

October 2077.03 2119.2November 1765.09 2212.44December 2466.16 2726.2

Total 6308.28 7057.84

Source: Export Promotion Bureau, Bangladesh

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October November December0

500

1000

1500

2000

2500

3000

2077.03

1765.09

2466.16

2119.2 2212.44

2726.2

Export (in million $)

2012-2013 2013-2014

The export sector of Bangladesh has experienced quite a satisfactory growth during last

quarter of 2013 compared to same of 2012. It is seen that there was overall growth to

$7057.84m in export which means overall during October-December 2013, $7057.84m worth

of goods and services were exported from our country to abroad, among which November,

2013 faced a mentionable increase to $2212.44m from $1765.09m in November, 2012. Both

in October and December, 2013 the export has also increased in a handsome number

indicating the economy’s increasing number of gross output of products and services as well

as demand of domestic goods in foreign markets.

Discussion of Overall Condition of the Economy:

Inflation was increased during the reference period ending up at 7.53% on an average in

December, 2013. The possible reason behind this rise might be the political instability

(continuous strikes, transport blockades etc.) of the country during that period which caused

harm to each and every sector as both production as well as distribution channels got affected

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as the capital Dhaka city was almost cut off from the other parts of the whole country due to

non-stop hartal, oborodh etc which definitely forced the price of products and services to rise

and might resulted in increased inflation. So, comparing the reference period with the same

period of previous year, the inflation condition has worsen little bit as the inflation has

increased.

Regarding Exchange rate, Taka has appreciated in October-December, 2013 with an ending

rate of 77.75tk/$ compared to 80.53tk/$ in the same period of 2012 which was indicating the

USD becoming less costly in terms of Tk. which might result in making import more cheap,

increasing both demand for import and demand for foreign currency etc. The exchange rate

during the reference period was quite stable at 77.75tk/$ on average.

Import sector of Bangladesh during the reference period experienced a rising trend compared

to same period of previous year indicating towards growing domestic demand. Import

payments along with fresh opening of import LCs increased over the reference period

significantly which might result in improve in productivity of the economy over the long run

as import LCs are usually opened for importing raw materials, machines, equipments etc. for

the industrial sectors and by using those in the future the overall productivity of the economy

might increase. The rising trend of import in October-December, 2013 might be because of

the appreciated exchange rate to some extent as the appreciated value of Taka makes import

cheaper as well as increases the demand for import as mentioned above.

In terms of Export, Bangladesh economy has improved during October-December, 2013

compared to the same period of 2012 as the overall export growth increased at $7057.84m

from $6308.28m indicating the increasing demand of domestic goods in foreign markets.

Major source of this rising export possibly must be the RMG sector as we all know always.

The import of $9741.04m (total import payments-c&f) was more than export (total

$7057.84m) in the reference period resulting in a negative Trade Balance of ($7057.84m-

$9741.04m) = - $2683.2m which might not a good sign for the economy if it lasts for long.

Limitations:

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The major limitation that I faced while preparing this report was to get the accurate and

adequate amount of data as the websites of our country are neither that much informative nor

updated properly for which the quality of information is poor. Time constraint was also

another limitation for which it was not possible for me to analyze very deeply through

digging the root level information regarding the four selected indicators and their causes &

effects in the overall economy.

Conclusion:

The inflation rate increase was comparatively high in the reference period against the same

period of last year. The appreciation of taka with a quite stable exchange rate was actually

complementing the overall economic condition of the country during the period as the value

of Taka increased. The increase of both export and import indicates the rise in both domestic

demand as well as domestic supply over the reference period but as import increased more

over export, trade deficit occurred.

So, to sum up the whole discussion it can be said that, in the period of October-December,

2013 compared to the same period of 2012 both of the import and export sector boomed

along with a quite stable appreciated exchange rate and an increasing inflation rate over the

reference period of October, 2013 to December, 2013.

References:

Website of Bangladesh Bank, World Bank, Bangladesh Bureau of Statistics etc.

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