Getting to the trillion dollar economy

According to the International Monetary Fund (IMF), Bangladesh's nominal GDP in 2024 was about $450 billion. It is forecast to rise to $717 billion by 2030. If this trajectory continues, Bangladesh could easily have a trillion-dollar economy by 2035.

In other words, the trillion-dollar economy that political parties often promise is likely to happen even without additional policy measures.

Of course, nominal GDP in US dollars reflects both inflation and possible depreciation of the taka. When economists talk about a "bigger" economy, they usually mean real GDP, which adjusts for inflation. Real GDP growth — after accounting for changing prices — is what truly matters for improving living standards.

When we reframe the objective — a trillion-dollar economy in today's prices — it turns out that achieving it would require 8% annual growth over the next decade. This target, however, will demand deliberate policy actions by successive governments.

The question, then, is: Can we achieve 8% annual real GDP growth for a decade?

Economic theory suggests that, over the long term, growth depends on factor accumulation and productivity. In other words, reaching the 8% growth target will require significant boosts to investment, employment and productivity.

Each of these metrics presents both challenges and potential opportunities.

Setting the stage for an investment boom

Let's start with investment. Private investment slumped in the last two years of the fallen Hasina regime and then ground to a halt under the interim government. International financial institutions project a rebound in investment over the medium term, accompanied by real GDP growth recovering to around 6%. 

The challenge is clear: How can we turn the cyclical recovery into a sustained increase in high-quality investment?

At the same time, the challenge presents an opportunity. The cyclical recovery is expected to bring roughly $10 billion of domestic private investment into the economy each year. 

If the incoming government can foster an investment-friendly environment — through political stability, macroeconomic stability, and concerted efforts to implement market-friendly regulations — it is entirely possible to achieve a self-sustaining investment boom.

Unleash the power of women

Turning to employment, the challenge is well understood: How can we create millions of jobs in the formal sectors of the economy? The opportunity, however, is often underappreciated. 

Only one-third of the Bangladeshi labour force is female, which is lower than in our neighbours in Southeast Asia. Policy lessons that have worked in those countries can be adapted to Bangladesh. 

Even a concerted effort to improve law and order and ensure women's safety in public spaces could go a long way. Studies suggest that increasing female labour force participation could add 1–2 percentage points to annual growth.

Catch-up growth

Productivity — measured as value added per worker — in Bangladesh is much lower than in neighbouring countries, in both the industry and services sectors. 

That this is depressing is self-evident. But how can it also represent a potential opportunity?

Economic theory suggests that firms in countries with low productivity can adopt technologies from more advanced economies, learn their business practices and know-how, and thereby boost productivity. 

The experiences of our neighbours — eastern neighbours, Southeast Asia and China learning from Korea, Taiwan, Hong Kong, and Singapore, which in turn learned from Japan, and Japan itself learning from the West — over the past century support this theory. 

Similarly, the experience of Central and Eastern European countries that successfully transitioned out of communism over the past three decades bears it out.

In other words, catching-up growth is very much possible. There is no inherent reason why practices used by Thai retailers or Indonesian manufacturers would not work in Bangladesh. 

Incremental, common-sense governance that ensures political and macroeconomic stability can also allow private entrepreneurs to experiment and innovate by applying methods that have worked elsewhere.

In short, a virtuous cycle of productivity improvement, an investment boom, and job growth is entirely achievable if the government maintains political stability, macroeconomic stability, and market-friendly regulations.

These outcomes will not happen automatically; conscious efforts will be required from successive governments. The good news is that textbook economic principles can guide policy, so there is no need for disruptive or revolutionary approaches.

Wages have fallen behind prices

First, let us consider political instability. While we can debate endlessly about history or ideology, the fact remains that the Monsoon Revolution and the ensuing instability occurred at a time when inflation was outpacing nominal wages, eroding people's real income.

In other words, unless the incoming government ensures macroeconomic stability — by maintaining a stable currency, rebuilding the banking sector, and upholding fiscal discipline — political instability is likely to follow. 

However, none of these problems are intractable. Policymakers understand the steps needed to maintain macroeconomic stability. In fact, for several decades between 1975 and 2010, successive governments were able to maintain it.

In the fiscal shadows of the fallen despot 

Hasina changed this after 2010, leaving us with a debt hangover. Yet even this can be seen as a constraint that is a blessing in disguise. 

Any incoming government will know that they do not have the largesse to mismanage public finances. There is a saying in Bangla: Shujog-er obhabe charitraban (of decent character due to a lack of opportunity). 

Over the next decade, successive governments may be disciplined by the risk of a fiscal meltdown — and the result could well be the stability we so desperately need.

In other words, despite all the trolling, politicians' promises of a trillion-dollar economy are entirely achievable. In fact, this can be accomplished without revolutionary or disruptive changes. Textbook economics, policies that have worked in countries similar to ours, and the entrepreneurial spirit of our people can together create a trillion-dollar economy within a decade.

The choice in this election is to vote for a party that will provide the stability necessary to realise our potential.

Jyoti Rahman is an applied macroeconomist