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The Numbers Behind Bangladesh’s Goal of Middle Income Status by 2021

Zahid Hussain's picture

This is the fourth in a series of six posts about the recent report, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth. The last post, Be Happy Yet Do Worry: Explaining Resilience in Bangladesh's Economy, explained how the economy has withstood recent shocks. The next post will look at what sort of policies it will take to achieve the goal of middle income status by 2021.

Bangladesh’s economic growth has followed a path both theory and international experience would expect. Starting from a low income level, growth initially tends to accelerate through capital accumulation in a market economy. This is what happened in Bangladesh during the four decades since independence in 1971. A recent article in The Economist rightly said, “Bangladesh has become a model of what can be done”. Progress achieved so far provides a credible basis for aspiring to be a middle income nation by 2021, as observed in the World Bank’s recent report “Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges”.

Would it take more than just maintaining recent growth rates to achieve middle-income country (MIC) status? It is important to be clear about how middle-income status is defined. It is based on nominal Gross National Income (GNI) measured in Atlas dollars, not real Gross Domestic Product (GDP). Economies are divided according to 2012 GNI per capita, calculated using the World Bank Atlas method. The income thresholds are: low income—$1,025 or less; lower middle income—$1,026 to $4035; upper middle income—$4036 to $12,475; and high income—$12,476 or more.

At current prices, Bangladesh’s per capita GNI would have to exceed US$1,025 to reach the lower end of “low middle income” status. Nominal Atlas GNI per capita, currently $851, will need to grow at a sustained 2.1% and nominal Atlas total GDP will need to grow at 3.5% per annum from now onwards for Bangladesh to reach the middle-income threshold by 2021, when Bangladesh will celebrate its 50th year of independence.

Public Health Insurance in India: The Real Story

Jesko Hentschel's picture

You might not think of health insurance as a suspenseful subject, but a recently released book on the subject proves different. As such, there is one missing entry on the back cover, describing the book "Government-Sponsored Health Insurance in India: Are You Covered?" by authors Gerard La Forgia and Somil Nagpal. Perhaps something like “The authors play with their readers’ nerves as they drill deeper and deeper into the mysterious workings of health insurance programs in India. Slowly a multi-faceted picture emerges, which the authors skillfully bring to bustling life, not least by adding fiscal and political economy spice throughout.”

Turbo-Charging Green Growth through Knowledge

Mabruk Kabir's picture

Flooding in BangladeshHot on the heels of Hurricane Sandy, Typhoon Bopha lashed the shores of the Philippines earlier this month, leaving 900 dead and 80,000 homeless. Extreme weather is becoming the norm. The World Bank-commissioned report, “Turn Down the Heat: Why a 4°C Warmer World Must be Avoided” found that scientists are unanimously predicting warming of 4 degrees Celsius by the end of the century. The social, economic, and environmental consequences will be devastating. Over the past 20 years, over half of South Asians – more than 750 million people – have been affected by natural disasters, with the loss of life estimated at more than 60,000, and damages above $45 billion.

Why Are Pakistani Students So Excited About Discussing ‘Open Defecation Free Status’?

Masroor Ahmad's picture

After 29 hours of working without break, followed by presentations and a tense six hour wait for results, Agam Saran excitedly announced on Facebook that his team was one of two winners of the Water and Sanitation Hackathon Pakistan.

The 21-year old student at COMSATS Institute of Information Technology, on a team with four friends, was one of 106 students, aged 21 to 26, who spent the December 1-2 weekend in Lahore, developing mobile and web based applications for water and sanitation utilities in Pakistan. They came from various universities across the country to participate in the Sanitation Hackathon 2012.

My Wakeup Call

Onno Ruhl's picture

It was a 4:30am wake-up call on a cold morning in Delhi for my flight to Lucknow. I stepped into the shower… only to find cold water. Not the best start of a day I have had!

When I got back from my trip a few days later, I asked the building manager why there had been no hot water at that time. “Sir” he said, “it is solar; 4:30 is too early!"

I had to think about that for a while. Different perspectives raced through my mind: First, I thought it was great that the water heating was solar and thus running on clean energy. After that, I thought that it was a real pity we do not know how to store solar energy so that we could still have hot water at 4:30 in the morning. After that again, I actually felt it was perfectly OK not to have hot water at 4:30 in the morning: we will not be able to solve our energy problems without some compromises for those of us who have hot water at all. And that brought me to the most important realization: millions and millions of people were waking up at the same time as I did, but theirs was a dark winter morning because they do not have electricity to turn on a light bulb, let alone get hot water for a bath.

Be Happy Yet Do Worry: Explaining Resilience in Bangladesh's Economy

Zahid Hussain's picture

This is the third in a series of six posts about the recent report, Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth. The last post, The Paradox That Bangladesh Isn’t, explained the sources of GDP growth over the past two decades. Next week's post will look at how the country can achieve its goal of middle income status by 2021.

The World Bank’s report “Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges” observes that growth in Bangladesh has been resilient at above 6 percent in recent years, despite several external shocks that slowed exports, remittance and investment growth. Since 2006, Bangladesh has faced political uncertainty (2006-2007); two major floods, the disastrous cyclone Sidr, and Avian Flu (last half of 2007); food and energy price crises (first half of 2008); global financial meltdown and recession (2008-2009); political transition followed by mutiny (first half of 2009); and rapid deterioration of the power and gas supply situation (first half of 2010). Currently, it is braving the impact of Euro area crisis and internal uncertainties surrounding the expected political transition in early 2014. These exogenous shocks resulted in a decline in the efficiency of investment, but the private investment rate itself managed to grow at a rate faster than the growth of GDP while the public investment rate declined. The economy has demonstrated resilience time and again.

“Imagining our Future Together”: Young Artists’ Perspectives on South Asia

Onno Ruhl's picture

“The World Bank is organizing an art show?” My neighbor seemed stunned. He has just got to know me, since I moved to India only in early September. To him I am the economist who moved to India from Washington. Quite possibly, he thinks I have come to India to try and tell the government what to do.

“Why?” He asked. I told him it was because we wanted to stimulate thinking about South Asia’s common future. “Why?” he insisted. I told him many other regions in the world have discovered that a common future brings better lives to citizens than separate futures. “Aha!” he said, “you want to promote free trade”. He thought he had recognized me again.

It was a most interesting conversation to me. The art show had not been my idea, but it felt very natural to me. After all, my wife is a painter and photographer, and I have therefore helped organize many art shows in the past. But this one is very different. It's a group exhibit by the winners of a competition we launched in all countries of South Asia.

The Paradox That Bangladesh Isn’t

Zahid Hussain's picture

This is the second in a series of six posts about the recent report, “Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth”. The first post was Better Jobs Can Outweigh a Secure Life. Next week’s post will look at how Bangladesh’s economy has remained resilient despite global and local shocks over the past few years.

Bangladesh lacks natural resources and good governance. It is beset by natural calamities. Corruption and self-destructive political non-cooperation are common. Yet Bangladesh’s GNI per capita more than tripled in the past two-and-a-half decades, from an average of US$251 in the 1980s to US$851 by 2012. This growth was accompanied by impressive progress in human development. Growth in GNI came almost entirely from growth in GDP in the 1980s and 1990s, but this changed in the last decade due to a surge in remittances from Bangladeshi workers abroad. GDP growth has accelerated by a percentage point and per capita GDP growth has accelerated by 1.7 percentage points in each of the last four decades. A recently published World Bank report, “Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges” explains how Bangladesh managed to beat the odds.

Where did GDP growth come from? 

Better Jobs Can Outweigh a Secure Life

Zahid Hussain's picture

People on a boat in BangladeshOn Nov. 7, 2012, a motorboat carrying 110 illegal immigrants heading for Malaysia capsized in the Bay of Bengal close to Bangladesh’s southeastern border with Myanmar. This tragedy came less than a fortnight after a boat with more than 135 passengers capsized in the same area. “Boat capsized with illegal immigrants from Bangladesh” is a recurring story, with Thailand, Malaysia, and other Southeast Asian countries the destinations of illegal work seekers. What makes Bangladeshis resort to such extreme methods of migration?

South Asia Would Be Permanently Altered at 4 Degrees and Beyond

Charles Cormier's picture

Ferry point at river in southern Bangladesh. Stephan Bachenheimer/World Bank
For a number of years, a majority of South Asians have been painfully aware that climate change is real and, if left unfettered, has the potential to reverse the significant gains the region has made on poverty reduction and other Millennium Development Goals.

In 2009, the government of the Maldives held a Cabinet meeting underwater to remind the world that the country – which is on average 2.7 meters above sea level – will be completely wiped out if oceans rise.

Nepal’s government held a Cabinet meeting at the base of Mount Everest – at an altitude of 5,242 meters above sea level – to stress that 1.3 billion Asians depend on the seven major rivers with headwaters originating from the vulnerable Himalayan glaciers for their livelihoods.

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