An Economic Report on Bangladesh

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PART 1

INTRODUCTION

Bangladesh is a country which located inSouth Asia. It has over 160million people in the country and is considered as one of the world's most populous countries. The instability of their politic and poverty problem have become one of the challenges face by Bangladesh. Bangladesh has reduced population growth lately in order to resolve the poverty problem. Health and education also have been improved in recent year. Bangladesh is trying to make its economy to become more diverse with the development of industrial as a priority. It is also a main agricultural producer in global such as the production of rice, tropical fruits, tea and others. The export ofceramics has also increased especially bone chinaandporcelain. Bangladesh ranks as the fifth-largest green jobs in the global because of the fast growingsolar powerindustry in the country. Natural gas is also a major reserve for the country.Bangladesh is also the world’s fourth largest textile exporter. This can be proved as there is 70% of export earning in Bangladesh came from thetextile industry.TheReady-Made Garments (RMG) sectorof Bangladesh is the second largest exporter in global.This sector has much contributed to theGDP of the country.

Thailand is a newly industrialized country in Southeast Asia and considered as the second-largest economy. It has around 67.01million of people in the country. In the year between 1985 until 1996, Thailand has a rapid economic growth and cause them to become a major exporter in global. Thailand economy is heavily export-dependent, with export approximately more than half of its GDP. The industrial and services sectors are the main sectors in the Thailand’s GDP, with the former accounting for 39.2%. Besides, Thailand’s agricultural sector produces 8.4% of the GDP which is below the trade and communication sectors with the amount for 13.4% and 9.8% of GDP respectively. In additional, the constructions and mining sectors of Thailand adds 4.3% to the GDP. Other services in Thailand has taken up around 24.9% of the country’s GDP. In the other hand, the unemployment rate in Thailand is quite low as most of the people can found a job in agriculture sector or on other sectors. (Jitapunkul, S. and Bunnag, S., 1998). JOURNAL 2

CONTENT

(i) Gross Domestic Product

GDP is the market value for of all final goods and services which produced within a country in a specific period of time. Economic growth is a situation in which the capacity of an economy increase over time. This would occur when people use their resources more efficiency and make the resources become more valuable.

Bangladesh

From the calculation, we can know that the overall growth rate of Bangladesh from year 1986 to 2010 is increasing more steadily compare to Thailand. The growth rate of Bangladesh drop to the lowest point in year 1988 from 3.73% to 2.16%. The drop of the growth rate in between this years is because of the terrible flood occurred in 1988. This flood had affected most of the area of the country. It cost about US$ 2,137,000,000 to the country because of the economic damage. This financial loss had cause the growth rate to decrease. (Carlo del Ninno, 2001). In the year of 1989 to 1990, the growth rate of Bangladesh have a rapid increase from 2.61% to 5.94%. This rapid increase of growth rate is because of the launching of a series of comprehensive stabilization measures which get the economy of Bangladesh back to the path from the deep macro-economic crisis. (Bhattacharaya, 2004).

In the year of 1991, the occurrence of Cyclone Marian in Bangladesh has cause the growth rate decrease to 3.34%. This natural disaster has led to a serious destroy to the agricultural sector. There was a disruption about 247,000 tons of cereal crops and 35,000 tons of vegetables, tubers, and other crops. The amount of $1.78 billion was used for the reconstruction. (Brilliant, 1992). In year 1992, the growth rate increase back to 5.04% because of the disaster recovery. The US government has gave around $28,000,000 to Bangladesh as a help for them in the recovery plan. This cause the economy of Bangladesh relief in a short period. From year 1992 to 2010, the growth rate of Bangladesh has a slightly fluctuated in overall. It has reach the peak in year 2007 with 7.06%. The economy of Bangladesh seems to be stabilize after the disaster recovery of Cyclone Marian.

Thailand

Since 1980, The Japanese companies has been attract by Thailand and finally became a country with export-led economic development. Start from the year 0f 1987, Thailand encounter a rapid economic growth with an average of 9.52%. Through the direct investment from Japan for several years which has bog down, Thailand has rose to the highest level in five years for both of the year of 1995 and 1996. By the year of 1997, it had fallen to -1.37% and continued to decrease to -10.51% in the next year. The lowest growth rate of Thailand is this 2 year because of the financial crisis. This low growth real in real GDP has cause the increase in unemployment rate by three times from 1.5% of the labor force in year 1996 to 4.4% in year 1998.

From year 1999 to year 2000, Thailand had a positive real GDP for the first time after the financial crisis which are increase from 4.45% to 4.75%. From year 2001 to year 2006, the administration of former Prime Minister Thaksin embraced a ‘dual track’ economic policy that combined domestic stimulus programs with Thailand’s traditional promotion of open market and foreign investment. Therefore, real GDP growth strengthened sharply from 2.17% in year 2001 to 7.14% in year 2013 and 6.34% in year2004. In year 2005 to year 2007, economic expansion become moderate with the average growth rate of 4.6% to 5.04%. This is because of the uncertainty in domestic political, rising in the violence of Thailand and the bad influences from the destructive of Indian Ocean tsunami in the year of 2004. By the year of 1998, it had fallen to 2.48% and continued to decrease to 2.33% in the next year. The highest real GDP of Thailand is in 2010 which is 7.81%.

(ii) Inflation Rate

Inflation is a continuous increase in average price level of good and services. When inflation rate increase, the purchasing power will decrease and people will able to consume lesser good and services with the same amount of money. Consumer price index is a measure that examines the weighted average price of final goods and services. Besides, the measure of inflation and deflation in an economy is mostly identify by the used of CPI. An increase in CPI during a short period of time will lead to inflation generally and a decrease in CPI during a short period of time will lead to deflation.

Bangladesh

From the calculation above, we knew that the overall inflation rate of Bangladesh seems to be higher compare to Thailand. The inflation rate of Bangladesh has decrease from 9.87% to 3.01% in the year of 1987 to 1993. This is because of the application of contractionary monetary policy by the Federal Reserve in Bangladesh in order to restrict the spending of economy. With the application of monetary policy, the money supply had decreased and it cause the interest rate to increase which effectively reduce the spending of economy. (Md. Aminul Islam, 2010). In year 1995, the inflation rate of Bangladesh has reach a peak at 10.30%. The high inflation rate is cause by the global price hike. Bangladesh import food and petroleum from other country, so they have to bear the occurrence of global price hike of imported goods and services by increase their inflation rate. (Mohammad Zoynul Abedin, n.d.).

While in year 2001, the inflation rate reach a minimum point at 2.01%. This is because of the happened of financial crisis in 1997. This financial crisis cause the money supply to decrease and so decrease the expenditure of consumer. It cause a large budget deficits and also increase in unemployment rate. (Dick K. Nanto, Coordinator, 2009). After the global financial crisis, the basic structure of market-based capitalism and liberalized international trade are likely to survive and lead to the inflation rate of Bangladesh back to normal rate and become more stabilize in general.

Thailand

From the data given, we can observe that the highest and lowest CPI of Thailand from year 1986 to 2013 which is 41.91 and 109.27 respectively with the base year of 2010. CPI in Thailand increase slowly from year 1986 to year 2013 because of the demand pull inflation. Demand pull inflation is a situation in which the rise in price level is because of an imbalance between aggregate supply and aggregate demand. Inflation occur when the aggregate demand in an economy in more than the aggregate supply because there are too many dollars chasing too few goods.

Based on the graph above, we can observed that there is a slowly increase in inflation rate of Thailand from year 1986 to year 1990 which are from 2.47% to 5.86%. But, inflation rate started o decrease from year 1991 to year 1993 from 5.86% to 3.31% due to the government fiscal policy. By the year of 1994, it had increase to 5.05% and continued to rise to 5.82.% in the next year. In year 1997 to 1998, the inflation rate increase from 5.63% to 7.99%. This rapid increase in inflation rate of Thailand is due to the Asian financial crisis which happen in July 1997. This Asian Financial crisis cause the price level of final goods and services to increase which lead to the decreases in consumer’s purchasing power.Relating inflation to economic growth, the Thailand economy has just recovered from the recession in 1997. A small decline in inflation rate in 1999 was due to the dot-com bubble in the USA.

From year 2000 to 2001, the baht appreciated and inflation started to increase from 1.59% to 1.63%. This increase in inflation rate is derive from the fragility of the dollar and the implementation of unconventional monetary policies in developed countries, putting pressure on the Thai baht to appreciate, along with inflation hikes as a consequence of policy packages by the Royal Thai Government to counter global economic recession and costs of living threat. Based on the graph, we found that inflation rate of Thailand is keep increasing from 2002 until 2006 year which are from 0.7% to 4.64%. From year 2007 to year 2008, the inflation rate of Thailand increase slowly which are from 2.24% to 5.47%. When in the year 2009, the inflation rate rapidly decrease and become negative which is -0.85% and increase to 3.27% in year 2010.

CONCLUSION

From the report, the can conclude that the growth rate of real GDP in Bangladesh is better than Thailand because it is more stable compare to Thailand. The stable increase in the growth rate mean that Bangladesh has a better economy performance compare to Thailand. While for the inflation rate, we can discover that Thailand is better than Bangladesh because the overall inflation rate of Thailand is lower than Bangladesh. A lower inflation rate is better for a country as it increase the purchasing power of consumers and encourage them to consume more goods and services.

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