Milestone: USD One trillion

“The World in 2050: Will the shift in global economic power continue?” elevated Bangladesh as the 23rd largest economy in Purchasing Power parity [PPP] in 2050, surprisingly above Australia and Malaysia. The Report prepared in 2015 by PricewaterhouseCoopers [PwC] projected that the Gross Domestic Product [GDP] in PPP would be $ 1,291 billion in 2030 and $3,367 billion in 2050.

Bangladesh was in the 31st position trailing behind Vietnam in 2015. The country could attain 29th and 23rd position in 2030 and 2050 with a GDP of USD 1,291 billion [PPP] and USD $ 3,367 billion [PPP] respectively. PwC, headquarter in London, United Kingdom is a multinational network of firms ranked as the second-largest professional services network in the world. The report indeed was an eye opener to the world on the astounding achievement of Bangladesh once ridiculed as “the basket case’. Indeed, the resilience and vitality of the economy are corroborated through the GDP growth [real] of average 6.8 percent during the last three decades that could pave the way of the graduation of economic status of Bangladesh to a developing country from the category of Least Developed Countries [LDCs] in near future.

The overall economic growth is measured by the changes in real GDP calculated at constant price. The GDP of any country is primarily calculated in a domestic currency, i.e, the GDP of Bangladesh is calculated in Taka, the currency of Bangladesh. There are two ways to record GDP through a vehicle currency (mainly in USD); either through the Official Exchange Rate [OER] or PPP. When you quote GDP in PPP, you calculate GDP of the country using the United States price vector for commodities and services. The exchange rate which is determined through the demand and supply of a foreign currency vis-a- a-vis the demand and supply of a local currency is OER. Thus GDP quoted through any vehicle currency needs to be qualified either in OER or In PPP. The GDP of Bangladesh in OER and in PPP is different as the OER rate is undervalued in Bangladesh currency; you need to pay more Bangladesh taka to buy one USD. The United States’s GDP is same both in OER and In PPP as most of the countries quote GDP using USD as the vehicle currency. When we quote per capita income of Bangladesh as USD 2227, we quote in OER but the per capita income of USD 5310 in PPP.

The GDP of Bangladesh was USD 324 in OER and USD 837 billion in PPP in 2020 as compared to GDP of Vietnam of USD 271 billion in OER and USD 842 billion in PPP. So, tracing the path with Vietnam gives an encouraging picture on the achievement of Bangladesh with a population of 167 million in comparison to 89 million in Vietnam. Another study conducted by the Centre for Economics and Business Research (CEBR) in 2020 projected that Bangladesh's economy would be 28th largest in 2030 and 25th largest in 2035, with the current ranking of 41st out of 193 countries. Bangladesh ranked 59th in 2010 and 48th in 2015.

The CEBR based in the United Kingdom expects the ranking of Bangladesh would improve significantly to 34th in 2025 and 25th largest economy in 2035 with GDP of $ 1.0 trillion in OER. The GDP at current prices [OER] would stand USD 338 billion in 2021, USD 488 in 2025, USD 760 billion in 2030 and USD 1.0 trillion in 2035. Another landmark in this projection panorama is the forecast by the leading economists of the Standard Chartered Bank’s global research team that the economy would cross the bar of USD 500 billion in [OER] in 2026 with per capita income of USD 3000; Bangladesh's graduation from the LDC status to developing country status. The global research team made the observation at a recent media session held following the 2021 Bangladesh session of the bank’s Global Research Briefing series. “ While the pace and distribution of global recovery remain highly uneven, Bangladesh has made a strong comeback with one of the highest GDP growth in the world in 2020. A robust vaccination program and implementation of strategic infrastructure projects are expected to further increase momentum towards the nation’s LDC graduation. “

Any projection is based on certain fundamental criteria and results may vary on the basis of assumptions and future outlooks. The robustness of findings is embedded in the tenacity and degree of variation when assumptions are changed due to exogenous factors. However, the projection in these three crucial surveys is converging to a focus. The country approximately needs another fifteen years to strike the target of USD 1 trillion and as per the Standard Chartered Bank’s global research team another five years to cross the USD 500 billion mark. When a country or a nation sets a target or a target is bestowed by a group of reliable sources, it is incumbent on the nation to follow the dictum outlined in the studies to fulfill the target.

Is the target staggering? The convergence of the projections and the past performances indeed ushered optimism for us. The government agenda to spur growth through the Eighth Five year Plan [2020-25] and Second Perspective Plan [ 2021-2041] manifest multifarious aims at inclusive and robust growth through which the milestone in 2035 could be successfully achieved. The six core themes - rapid recovery from COVID-19 , growth acceleration, employment generation and poverty reduction, a broad based strategy for inclusiveness, a sustainable development pathway that is resilient to disaster and climate change , improvement of critical institutions necessary to lead the economy to upper middle income countries status by 2031 and mitigating the impact of LDC graduation ensnared in these two documents amply testify the holiness of the government in attainment of this target.

PwC highlighted political, legal and regulatory institutions as the fulcrum through which growth may be steered and sustained. The most important are an independent and credible central bank for monetary and macroeconomic management, a fair and efficient tax regime and a cost-effective budget for fiscal prudence and high levels of trust essential for social cohesion. Indeed, high levels of trust depends on sound political institutions that “allocate power to groups with broad-based property rights enforcements, impose constraints on power-holders, and allow relatively few rents to be captured by power holders.” The nitty- gritty of institutional economics is now covered under the rubric of New Institutional Economics [NIE] that delineates the theoretical paradigm of state failure and the structure of the political system. Growth may falter in an economy that is not bestowed with sound institutions ensuring a transparent transaction process among the economic agents and different stakeholders in the society.

The writer is the Treasurer and a Professor at the School of Business and Economics, United International University.