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Bangladesh Development Update

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Bangladesh Development Update Public Disclosure Authorized Public Disclosure Authorized Bangladesh Development Update Public Disclosure Authorized BANGLADESH DEVELOPMENT UPDATE Breaking the barriers May 2017 Public Disclosure Authorized The World Bank Office, Dhaka Plot E-32, Agargaon Sher-e-Bangla Nagar Dhaka – 1207, Bangladesh Tel.: (880-2) 5566-7777 Fax: (880-2) 5566-7778 www.worldbank.org/bd Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. Copying and/or transmitting ions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978- 750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected]. Photo Credits: Cover: ©The World Bank, 2017 Printed in Bangladesh Table of Contents Preface ....................................................................................................................... v Acknowledgement .................................................................................................... v Abbreviations and Acronyms ............................................................................... vi Executive Summary ................................................................................................. 1 I. Recent Economic Developments....................................................................... 5 Poverty Trends .......................................................................................................................................... 6 Real Sector Developments ........................................................................................................................ 7 Inflation Trends ....................................................................................................................................... 14 External Trade and Exchange Rates ....................................................................................................... 17 Fiscal Policy ............................................................................................................................................ 23 Monetary Policy ...................................................................................................................................... 28 Structural Reforms .................................................................................................................................. 29 II. An Analysis of Bangladesh’s Long-Term Growth Prospects ......................33 Setting the stage ...................................................................................................................................... 35 The growth dividends ............................................................................................................................. 36 Fiscal implications .................................................................................................................................. 38 TFP Growth and Resource Allocation across Sectors ............................................................................ 39 Determinants of TFP Growth at the Firm Level ..................................................................................... 40 III. Constraints on Female Labor Force Participation ......................................43 Household responsibilities ...................................................................................................................... 45 Human capital deficiency ....................................................................................................................... 46 Human capital mismatch ......................................................................................................................... 50 Open Discrimination by Gender in Hiring and Promotion ..................................................................... 53 Moving forward ...................................................................................................................................... 54 IV. Outlook and Risks ............................................................................................55 Global Prospects ..................................................................................................................................... 56 Outlook for Bangladesh .......................................................................................................................... 57 Risks ........................................................................................................................................................ 63 V. Policy challenges ..............................................................................................64 Structural impediments to investments ................................................................................................... 65 Energy ..................................................................................................................................................... 66 Fiscal reforms.......................................................................................................................................... 67 Financial sector reforms .......................................................................................................................... 68 Global integration ................................................................................................................................... 68 Increasing potential growth ..................................................................................................................... 70 A Road Map for Improving Women’s Labour Force Outcomes ............................................................ 70 Appendix .................................................................................................................75 Appendix Table 1: Bangladesh Macroeconomic Indicators ................................................................... 75 Appendix Table 2: Bangladesh Current Macro Economic Indicators .................................................... 77 ii List of Figures Figure 1: Remittance Performance (FY17) ................................................................................................................. 13 Figure 2: Inflation rate (%) .......................................................................................................................................... 14 Figure 3: Price trend of Coarse Rice, Soyabean Oil and Brinjal ................................................................................. 16 Figure 4: Overall BOP (% of GDP) and Reserve (US$ b.) .......................................................................................... 17 Figure 5: Exchange Rate .............................................................................................................................................. 17 Figure 6: Bangladesh: Real Effective Exchange Rate ................................................................................................. 19 Figure 7: Inter-bank and Informal Exchange Rate ...................................................................................................... 20 Figure 8: Interest Rate Movement ............................................................................................................................... 20 Figure 9: NPL as percent of Outstanding Loan ........................................................................................................... 21 Figure 10: Dhaka Stock Exchange General Index (Jan 2017-Feb 2017) ..................................................................... 22 Figure 11: DSE Ratios ................................................................................................................................................. 22 Figure 12: Expenditure and Current Expenditure (% of GDP) .................................................................................... 26 Figure 13: ADP Implementation (% of Revised ADP)................................................................................................ 26 Figure 14: Budget Target and Net Govt. Domestic Borrowing, FY17 (Jul-Jan) ......................................................... 27 Figure 15: Four Growth Scenarios..............................................................................................................................
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