Home ›› 26 May 2022 ›› Stock
CAL Bangladesh, a newly established foreign brokerage firm, has said Bangladesh is expected to become a US$4,000+ per capita GDP country by 2026, touching an upper-middle-income status by following a similar path to Southeast Asian peer countries.
The prediction was made in its macroeconomic report titled “Bangladesh economy is at an inflection point” unveiled at the Capital Market Journalists Forum (CMJF) auditorium in Dhaka on Wednesday.
The country’s per capita income stood at $2,824 in 2021-22, according to Bangladesh Bureau of Statistics.
CAL Bangladesh is a part of the CAL group. CAL is a leading Frontier Markets Investment Bank incorporated in the UAE with its roots in Sri Lanka.
The report covers CAL’s long-term bullish stance on the economy and its outlook on the short-term rates of interest, inflation, and currency.
Bangladesh’s economy is at an inflection point, said the brokerage house.
As external pressure mounts, taka will depreciate by 6-7 percent by the end of 2022, it added.
Ahmed Omar Siddique, head of research for CAL Bangladesh, said both developing and developed economies are exposed to macroeconomic challenges stemming from rising global inflationary pressure.
Despite near-term challenges, CAL’s long-term bullish stance is grounded upon its belief that Bangladesh will outperform peer countries due to its favorable demographics and robust domestic economy, he said.
The government’s major infrastructure development plans have required an increase in imports of intermediate goods and project-specific materials over the last few years and are likely to continue, he added.
CAL Bangladesh’s Chairman Ajith Fernando, Director Deshan Pushparajah, Raihan Shamsi, Chief Executive Officer Rajesh Saha and Chief Operating Officer Zobayer Mohsin Kabir were present at the event.
Ajith Fernando said that the CAL wants to go beyond its traditional business and add a new dimension to brokerage in Bangladesh.
“The potential for future investment in Bangladesh is very high. As a result, the capital market is also a potential sector of the economy,” he said.
The CAL wants to take advantage of the opportunity offered by Bangladesh, he added.
CAL Bangladesh will start operations for share trading within a short time in the country.
However, the report said in the short term, Bangladesh’s economy is expected to face a stiff challenge, primarily in the form of global headwinds as international inflation spills over onto domestic fronts.
CAL estimates inflation could reach around 8 per cent at the end of 2022 due to the surge in global energy and commodity prices, particularly a 43 per cent rise in oil prices from January 2022 levels.
In response to inflationary pressures, the report said the central bank likely opts for a balancing act between allowing interest rates to rise and a controlled depreciation of the taka.
CAL Director Deshan Pushparajah said Bangladesh’s economy has taken a similar path to Malaysia, Thailand, and Singapore as it approached the $2,400+ per capita GDP level.
These countries provide an encouraging precedent, having grown faster on their way to $ 4,000+ from the $ 2,500 level.
The economy could mimic a similar growth trajectory to continue its path towards the $ 4,000+ level, growing at 11 per cent annually in nominal terms over the next five years, driven by strong domestic consumption, the study said.
Domestic consumption, which accounts for more than two-thirds of GDP, is expected to increase at a rate greater than 12 per cent as the middle-class consumer base expands.
The country’s favorable demographic trends, with rising female workforce participation and a rising number of graduates, are likely to facilitate higher gross pay and lead to higher disposable income, a trend often observed in fast-growing Southeast Asian countries, CAL’s study said.
SME emerged as one of the most important economic growth drivers, with a 29.5 percent CAGR.
Employment has increased by 30 per cent in the last ten years, contributing to a 30% total employment contribution. CAL expects SME businesses to contribute 15.5 per cent of GDP by 2026.
As urbanization and income levels rise, CAL expects discretionary spending to overall consumption, with more money spent on recreational activities.
National household consumption is expected to grow at a CAGR of 15% per year, with urban households spending 1.3 times more than their rural counterparts by 2026.
The establishment of countrywide economic zones will help unlock untapped export potential by providing a manufacturing base for $40 billion in exports by 2026.
As per the report of the CAL, on the export front, the country’s dominant apparel export trade will
Consolidate further by moving up the value chain through product diversification.
At the same time, sectors such as ICT, pharmaceuticals, and light engineering are expected to see strong double-digit growth in the export arena, capitalizing on competitive cost advantages compared to peer countries.
