Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Bangladesh is a country the size of Iowa, situated in the northeastern corner of the Indian subcontinent and bordered by India and Burma, with a 2021 population estimated to be 165 million, according to the World Bank. Bangladesh is the eighth most populous country in the world, and the most densely populated other than city states. Bangladesh represents an excellent potential market for U.S. exports.
Bangladesh confirmed in 2021 it will graduate from the status of a Least Developed Country (LDC) in 2026 with, according to a World Bank estimate, a Gross Domestic Product (GDP) of per capita of $2,503 in 2021. Bangladesh has enjoyed consistent annual GDP growth of over six percent since 2005, with an exception in 2020 as the economy slowed because of the COVID-19 outbreak. Much of Bangladesh’s economic growth continues to be driven by exports from the $31.5 billion ready-made garment (RMG) industry and continued remittance inflows from expatriate labor, which reached a record $24.8 billion in fiscal year (FY) 2020-21. (Note: the Bangladesh fiscal year is from July 1 to June 20.)
According to the International Monetary Fund (IMF), Bangladesh’s GDP reached $354.24 billion in fiscal year 2020-21 with an annual growth rate of 6.94 percent. Despite this growth, a fiscal policy priority will be domestic resource mobilization, as tax revenues were only 7.7 percent of GDP in fiscal year 2020-21, according to the Bangladesh Ministry of Finance. The financial sector will also need to address the persistent problem of state-controlled banks’ high balance of non-performing loans (NPL). The Government of Bangladesh (GoB) actively seeks foreign investment, particularly in the apparel industry, light manufacturing, energy, power, agribusiness, and infrastructure sectors. The government offers a range of investment incentives under its industrial policy and export-oriented growth strategy. According to the United Nations Conference on Trade and Development (UNCTAD) Bangladesh received foreign direct investment (FDI) net inflows of $2.9 billion in 2021. Bangladesh’s central bank estimated foreign exchange reserves decreased from $44.96 billion in May 2021to $42.2 billion in June 2022.
Bangladesh’s export economy is dominated by RMG manufacturing, but the country remains largely rural with an urbanization rate of only 38.2 percent of the population. While the agriculture sector employs 40.6 percent of the population, it accounted for only 13.6 percent of GDP in 2017, according to the Bangladesh Bureau of Statistics (BBS). The industrial sector accounts for 35.1 percent of GDP and employs 20.4 percent of the population, primarily in the RMG and light manufacturing sectors. The services sector accounts for 51.3 percent of GDP and employs 39 percent of the population.
Bangladesh has one of the lowest wage rates in the world, which has fueled an expanding industrial base led by the RMG industry. It is well-positioned, however, to diversify its exports and move up the value chain. The country also has large pharmaceutical, footwear, and agricultural-processing industries. Other important sectors include construction, information, and communication technology (ICT) and business process outsourcing, light engineering, ship building, leather products, jute products, and ceramic products. There is substantial scope for U.S. companies to enter the market and invest in these thrust sectors.
Dhaka is the primary financial, political, and cultural center of Bangladesh. Located on the coast, Chattogram (previously called Chittagong), the second largest economic and financial hub, hosts the country’s major seaport, which handles more than 90 percent of the country’s international trade. Both cities host stock exchanges. A future economic hub is expected to form south of Chattogram in Matarbari, where the country’s first deep water port is under construction.
Two-way trade between the United States and Bangladesh reached $10.65 billion in 2021, an increase of 35 percent from the previous year when trade was impacted by COVID-19. Bangladesh was the 61st largest export destination for the United States while it was the United States’ 37th largest supplier of goods imports. The United States is Bangladesh’s largest single country export destination and the third largest source of imports for Bangladesh.
U.S. goods exports to Bangladesh totaled $2.35 billion while goods imports totaled $8.3 billion, resulting in a U.S. goods trade deficit with Bangladesh of $5.95 billion in 2021. The top import categories in 2021 were: woven apparel ($3.89 billion), knit apparel ($2.06 billion), miscellaneous textile articles ($268.5 million), footwear ($230.2 million) and headgear ($168.6 million). The top export categories from the United States to Bangladesh in 2020 were: ferrous waste and scrap ($592.78 million), soybeans ($475.66 million), and cotton ($311.15 million). Notable industrial goods exported to Bangladesh in recent years include turbines for power generation, commercial aircraft and parts, and locomotives.