the bangladesh story: performance and potential · asian financial crisis most severe flooding in...
TRANSCRIPT
The Bangladesh Story: Performance and Potential
FAISAL AHMEDSenior Economic Advisor
Bangladesh Bank
Outline
• The Bangladesh story
• Where we started
• Where we are today
• Where we are relative to peers
• The journey ahead
Where we are now – Context
Urbanization Industrialization
• From a low-income agrarian society at its birth in 1971, Bangladesh is now a lower middle-income country of 160 million people with a $250 billion economy in the midst of four critical transitions.
Urbanization
30
%
Industrialization
28
% G
DP
Demographics
50
% <
25
yr
13
0m
M
ob
ile
Technology
Where we are now – Poverty Reduction
• Growth from labor-intensive manufacturing, agriculture, and remittance has been inclusive, supporting poverty reduction and gains in HDIs.
100%
50%
75%
100%
Poverty Rate73Life expectancy 40s => 72 years
0%
25%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
25
Asian Financial Crisis
Most severe flooding in modern history, affecting 66% of the land, killing 26,000 livestock, and
damaging 16,000 km of roads
Severe cyclonic storm BOB 06:
300,000 affected, 8,755 homes destroyed
Slower growth
post 9-11
Severe Floods: 36% of the country flooded, affecting
36mn people
Cyclone Sidr: 3,500 people killed
Major floods: 500 people died, with wider repercussions affecting30% of the country
Oil price hikes, with price of crude brent
reaching > USD100/b
Global Financial
Crisis
Tropical catastrophic
cyclone
Growth trajectory remains steady despite domestic and external shocks
Two decades of resilient economic growthEx
tern
al
Fact
ors
Current EM volatility
Populism sentiment and commodity
price drop
5.3
5.0
5.45.6
4.84.9
5.8
6.16.3
6.9
6.5
5.55.3
5.6
6.5 6.5
6.06.1
6.6
7.1
4.5
5.0
5.5
6.0
6.5
7.0
7.5 Real GDP growth, %
roadshomes destroyed affecting30% of the country
was affectedExte
rna
l Fa
ctors
price drop
4.51997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F
Real GDP growth (%) Poly. (Real GDP growth (%))
MFA Phase Out 2006-08 Bangladeshi political transition Eection 2014
External Shocks Natural Disasters Political Crises
*Linear (Real (GDP growth (%)) is an extrapolated trend line of real GDP growthSource: Bangladesh Bank/IMF World Economic Outlook (October 2016)
Inte
rna
l Fact
ors
Where we are now – Inequality
• Inclusion minimized inequality: lower than the start and lowest among the peers.
10
20
30
40
50
Cross-Country Gini Coefficients
10
20
30
40
Gini Coefficient : Bangladesh
0
10
01973 1992 2010
1990 2014/ Latest
Bangladesh Bangladesh India Sri Lanka Pakistan
Progress in human developmentBangladesh has shown impressive progress in recent years, outperforming regional peers in several key social indicators
Bangladesh (BB-)
Bangladesh (BB-)
India(BBB-)
Sri Lanka(B+)
Pakistan(B)
Fertility rate, total (births per woman)
4.5 2.2↑ 2.4 2.1 3.6
Immunization, DPT (% of children 12-23 mths)
69% 94%↑ 87% 99% 72%
Life expectancy at birth, total (years)
58.4 71.6↑ 68.0 74.8 66.2
Literacy rate, adult total (% of people ages 15 and above)
35.3% 61.5%↑ 72.2% 92.6% 56.4%
Mortality rate, infant (per 1,000 live births)
99.7 30.7↑ 37.9 8.4 65.8
Source: World Bank
Where we are now – Financial Depth
• Bangladesh ranks well in terms of its financial depth and can facilitate foreign investments.
20
40
60
Domestic Credit(In percent of GDP)
Median Emerging Market Depth
0
20
Tanzania Kenya Mexico Indonesia Sri Lanka Nigeria Phillippines Bangladesh India
Where we are now – Financial Inclusion (MFS)
• Digital inclusion through MFS represents a paradigm shift.
22
30
39
20
30
40
Clients (In millions)Clients (In percent of adult population)
41 million
03
12
0
10
Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Dec '16
Where we are now – Financial Inclusion (MFIs)
• MFIs are playing an effective role in financial inclusion.
10
15
Borrowers (In percent of population)
10
15
Depositors(In percent of population)
0
5
Tanzania Nigeria Sri Lanka India Kenya Phillippines Bangladesh
240
5
India Tanzania Nigeria Sri Lanka Phillippines Bangladesh Kenya
Where we are now – Economic Structure
• Manufacturing and trade are thrust sectors; cottage-MSMEs are job-rich (rural: 70+ percent; 80 percent enterprises established since 2000)
Economic Units by Sector Employment by Unit Size
34
29
9 8 6
Economic Units by Sector(In percent of total)
54
29
17
Employment by Unit Size(In percent of total)
9 8 6
Tra
de
Mau
fact
urin
g
Oth
er s
ervi
ces
Tra
nsp
ora
tio
n
Ed
ucat
ion
Co
ttag
e
Mic
ro-S
mal
l
Med
-Lar
ge
Where we are now – Economic Structure
• Recent transformations fuelled by dynamic rural non-farm sectors (enterprise numbers more than doubled in last decade).
6371
Economic Units(In percent of total)
Rural
Urban
Units by Year of Inception(In percent of total)
37 29
2001 2013
7 13 80
Before '90 During '90s After 2000
Growing rapidly while maintaining macro-stability
173
195
221247
250.0
300.0
Economy has more than doubled since 2010GDP bn (USD)
5.6
6.5 6.56.0
6.1 6.67.1
6.0
7.0
8.0
YoY, %
Growth – stable and significantly higher than peers
115129 133
150
173
0.0
50.0
100.0
150.0
200.0
2010 2011 2012 2013 2014 2015 2016E 2017F
Monetary policy has been effective; inflation continues to be on a sustained decline
10
0.0
1.0
2.0
3.0
4.0
5.0
6.0
20
10
20
11
20
12
20
13
20
14
20
15
20
16
E
Bangladesh Average GDP growth of peers
35.0
USD bn
FX reserves, at around USD 32bn, are adequate
CPI Inflation (% )
7 months
Source: IMF WEO October 2016; Bangladesh Bank
7.3
8.8 8.7
6.8
7.4
6.4
5.9
5.31
4
5
6
7
8
9
2010 2011 2012 2013 2014 2015 2016 2017Feb
10.9 10.4 15.3
21.5 25.0
30.2 31.7
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
FY2011 FY2012 FY2013 FY 2014 FY 2015 FY2016 July-Jan FY 2017
Foreign Reserves (in USD bn), LHS
7 months
Robust growth amid a weak global backdrop
8.0YoY, %
1.4
1.92.0
1.61.7
2.00
2.50
Standard Deviation of 10 Yr Growth (2007-2016E)
GDP growth has trended higher than peers since 2010… … And is less volatile than other countries globally
Growth is marked both by low volatility from a diverse base and a higher near-term trend compared to similarly-rated peers
Growth is projected to be above 7% in FY17
5.6
6.5 6.5
6.0
6.16.6
7.1
3.0
4.0
5.0
6.0
7.0
0.5
1.41.6
0.00
0.50
1.00
1.50
Bang
lad
esh
(B
B-)
Pa
kist
an
(B)
Ind
ia (BB
B-)
Sri L
ank
a (B+
)
Wor
ld
Emer
gin
g
ma
rket
and
d
eve
lop
ing
eco
nom
ies
Source: IMF WEO Oct 2016
Strong growth compared to South Asian peers; Particularly significant in light of the current global economic weakness
Average Growth of South Asian Countries (2007-2016E)
0.0
1.0
2.0
20
10
20
11
20
12
20
13
20
14
20
15
20
16
E
Bangladesh Average GDP growth of peers
Source: Bangladesh Bank and IMF WEO Oct 2016Peers refer to all countries rated BB- as of 15 March 2017
7.4
6.36.0
3.7 3.5
5.4
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Ind
ia (BB
B-)
Ba
ngla
desh
(B
B-)
Sri L
ank
a
(B+
)
Pa
kist
an
(B)
Worl
d
Emer
gin
g
ma
rket
and
d
eve
lop
ing
eco
nom
ies
Strong growth is raising income and investment
Strong increase in GDP per capita reflects robust economic transitionsBangladesh is projected to witness higher investment flows over the medium term
Bangladesh is expected to see a steady rise in investment with continued improvement in infrastructure and business climate
35.00
40.00
Investment (% of GDP)
1,446
1,600
GDP per capita (USD) Projections
GDP = 7-8%
15.00
20.00
25.00
30.00
Bangladesh (BB-)
Vietnam (BB-)
Georgia (BB-)
Jordan (BB-)
Dominican Republic
(BB-)
Bahrain
Costa Rica(BB-)
Serbia(BB-)
808857
916
1,030
1,163
1,292
400
800
1,200
USD 1,100 threshold
GDP = 7-8%
Source: : IMF WEO October 2016Source: IMF WEO October 2016
10.00
15.00
20
10
20
11
20
12
20
13
20
14
20
15
20
16
E
20
17
E
20
18
F
20
19
F
20
20
F
Bahrain(BB-)
0
2010
2011
2012
2013
2014
2015
2016
35Bangladesh BB- India BBB- Pakistan B Sri Lanka B+ Serbia BB- Costa Rica BB-
Bangladesh’s improving competitivenessOne of the few sovereigns to have moved up in its competitiveness ranking compared to similarly-rated peers
35
55
75
95
115
135
Global Competitiveness Index (GCI), rank
2012-13
2013-14
2014-15
2015-16
2016-17
↑ More competitive
+12
+20-3
+5
+3
+2
A gain of 12 ranks since 2012-13
* As defined by the WEFSource: WEF
Diversified drivers to sustain growth aheadBangladesh’s well-diversified economy insulates it from sector-specific shocks
FY 2016 Sectoral Share of GDP: Agriculture (14.0%) FY2016 Sectoral Share of GDP: Services (53.7%)
Sub-sector share (percentage of GDP) Sub-sector share (percentage of GDP)
Fishing, 3.1%
Wholesale and retail trade;
repair of motor vehicles, 12.4%
Health and
Community, social and personal
services, 11.2%
FY 2016 Sectoral Share of GDP: Industry (27.3%)
Sub-sector share (percentage of GDP)
Mining and quarrying, 1.6%
Crops & horticulture, 7.8%
Animal farming, 1.9%
Forest and related services, 1.3%
Fishing, 3.1%Hotels and restaurants,
1.0%Transport,
storage and communication,
9.8%
Financial intermediation,
3.7%
Real estate, 7.1%
Public administration and defence,
3.8%
Education, 2.7%
Health and social work,
2.0%
services, 11.2%
Rising rural wages, an ongoing structural development, aid strong domestic demand., supported by pick up credit growth
Source: Bangladesh Bureau of Statistics, World Bank Review
quarrying, 1.6%
Manufacturing, 17.0%
Electricity, gas and water supply, 1.4%
Construction, 7.3%
Outperforming similarly rated peers
22.5
38 40.243.7 42.3
37.9
62.959.2
67.5
22.3
39.3
45.1 45.9 50.8
55.7 59.3
59.6 67.5
20304050607080
2016E 20172019F
Low debt levelNet general government debt(% of GDP)
5.2 4.8 4.9
6.36.1
14.1
3.6 4.2 4.3 5.7
7.5
9.9
6
8
10
12
14
16
2016E 2017-2019F
High fiscal flexibilityChange in general government debt (% of GDP)
6.3
5.1 5.5
2.6 3.0 3.0
2.0
0.6
5.3 5.2
4.5
3.3 3.0
2.7
2.7
1.1
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0 2016E 2017F
Strong per capita growthReal GDP per capita growth (%)
01020
Bang
ladesh
(BB-)
Georg
ia (
BB-)
Mace
doni
a(B
B-)
Dom
inic
an
Repub
lic (
BB-)
Cost
a R
ica (
BB-)
Bahr
ain
(BB-)
Jord
an
(BB-)
Vie
tnam
(BB-)
Serb
ia (BB-)
7.7 7.0
6.4 6.3
6
7
8
9
2016E 2017-2019F
Solid external financesGross external financing needs(CAR+ usable reserves)
Net external creditor positionNarrow net external debt (% of CAR)
3.2 2.9 3
5.2 4.8 4.9
2.4
2.7
3.6
4.3
5.7
0
2
4
6
Jord
an
(BB-)
Bang
lad
esh
(BB-)
Georg
ia (B
B-)
Ma
ced
oni
a(B
B-)
Serb
ia (B
B-)
Dom
inic
an
Rep
ublic
(B
B-)
Vie
tna
m (BB
-)
Cos
ta R
ica
(BB
-)
Ba
hra
in (BB
-)
316313
250
300
350
2016E 2017-2019F
Strong buffers against shocksReserves (months of current account payments)
(1.5)(1.8)(3.0)
(2.0)
(1.0)
-
Bang
lades
h (B
B-)
Vie
tnam
(BB-)
Dom
inic
an
Repub
lic (
BB-)
Geo
rgia
(BB-)
Serb
ia (BB-)
Cos
ta R
ica (
BB-)
Mace
don
i a(B
B-)
Jord
an
(BB-)
Bahr
ain
(BB-)
50.7
70.270.7
91.1
29.9 33.9 52.4
61.5 67.7
101.7
60
80
100
1202016E 2017-2019F
4.5 4.5
2.52.0 1.5
1.5 1.6
4.4
4.2 3.2
2.5 2.0
1.6 0.9
0
1
2
3
4
5
6
Jord
an
(BB-)
Bang
lades
h (B
B-)
Cos
ta R
ica (
BB-)
Serb
ia (BB
-)
Geo
rgia
(BB
-)
Dom
inic
an
Repub
lic (
BB-)
Vie
tnam
(BB
-)
Mace
don
i a(B
B-)
Bahr
ain
(BB
-)
68
93
98104
102
110 101120
6789
9799
102 106107
117
0
50
100
150
200
250
Bang
lades
h (B
B-)
Vie
tnam
(BB
-)
Serb
ia (BB
-)
Dom
inic
an
Repub
lic (
BB-)
Cos
ta R
ica (
BB-)
Mace
don
i a(B
B-)
Jord
an
(BB-)
Geo
rgia
(BB
-)
Bahr
ain
(BB
-)
Source: S&P Sovereign Risk Indicators (Dec 2016); Worldwide Governance Indicators
-43.1
-4.3
3.0
23.433.7
(29.0)
(10.4)(1.1)
29.9
-60
-40
-20
0
20
40
60
Bahr
ain
(BB
-)
Vie
tnam
(BB
-)
Bang
lades
h (B
B-)
Jord
an
(BB-)
Mace
don
i a(B
B-)
Cos
ta R
ica (
BB-)
Serb
ia (BB
-)
Dom
inic
an
Repub
lic (
BB-)
Geo
rgia
(BB
-)
The Journey Ahead...
Infrastructure: A coordinated big push BIDA has been mandated and empowered to improve the business climate.
Coordinated efforts underway to upgrade infrastructure.
Several transformative megaprojects are soon to be completed.
Infrastructure ProjectsCompletion
PeriodDhaka Chittagong Highway 2016
Special Economic Zones OngoingPadma Bridge 2018LNG Terminals 2018Inland Container Terminals Ongoing
Rampal Power Plant (1320 MW) 2018
10,000
14,000
Electricity Generation Capacity(In MW)
24,000 MW by 2021
Source: Bangladesh Bank
Rampal Power Plant (1320 MW) 2018Matabari Power Plant (1200MW) 2018-20Rooppur Nuclear (2400 MW) 2022Dhaka Metro Rail 2019
Deep sea ports 2023
2,000
6,000
FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15
A labor-intensive manufacturing-led growth
• A strong manufacturing base and skilled entrepreneurs can take advantage of the labor force.
100
200
300
Minimum Monthly Wage (In USD, per month)
82
40
80
120
Labor Force (In millions)
IDN = 3x BDG
00
Labor is ample and productive, relative to peers
1,500
2,200
3,000
8,300
2,000
4,000
6,000
8,000
Manufacturing Worker: Total Annual Salary (USD)
77
84
100
Bangladesh
Vietnam
China
Labor Productivity(In percent of productivity in China)
1,500
-
2,000
68Cambodia
Sources: McKinsey, JETRO
Poised to benefit from China’s rebalancing
• China’s rebalancing is a strong tailwind for manufacturing and diversification.
-3
-2
-1
0
1
2
Change in Market Share in Labor-intensive Goods (5 largest and smallest since 2010, ppts)
Apparel, Footwear, Furniture, and Plastic Toys
20
40
Global Market Shares of Garments Exports (In percent)
-4
-3
Ch
ina
Germ
any
Japan
Ho
ng K
on
g
Th
ailand
Mexico
Ind
on
esia
Cam
bo
dia
Ban
gladesh
Vietn
am
Apparel, Footwear, Furniture, and Plastic Toys
0China Bangladesh
Source: IMF
“Density” to support domestic demand and service sector
GDP Density (In millions of USD, GDP per sqm)
1.0
1.5
2.0
(In millions of USD, GDP per sqm)
GDP $250b
0.0
0.5
Myanmar Cambodia Pakistan Indonesia Vietnam India Thailand Malaysia Phillippines China Sri Lanka Bangladesh
The Bangladesh Story: Looking Ahead
Underrated Credit
More resilient and better cushioned than similarly rated peers.
High Inclusive
GrowthMedium-term growth at 7+. Growth more inclusive than peers; broad-based; reduced gender gaps and better HDIs.
Twin Engines A buoyant domestic demand and a competitive external sector.
Manufacturing Manufacturing Story
A manufacturing-led growth story, with a strong tailwind supported by service sector.
A Big Push Coordinated efforts underway to upgrade infrastructure, energy, and business climate
Thank you