Trade Balance of Bangladesh
Course Code: Fin2202
Submitted to:
Hasibul Hassan
Assistant Professor
Department of Finance
Jagannath University
Table of Contents
Submitted by: ............................................................................................. 3
Introduction ................................................................................................ 4
Economy of Bangladesh .............................................................................. 4
Imports of Bangladesh ................................................................................ 5
Exports of Bangladesh ................................................................................ 5
Trade Balance ............................................................................................. 6
2
Submitted by:
Group-18
Sl. No. Name ID No
01 Md. Emon Mia B-160203071
02 Tasnia Nazneen Nova B-160203014
03 Aminul Islam Tipu B-160203097
04 Shawon Barai B-160203125
05 Mahmuda Hussain Mim B-160203045
06 Sudipto Kundu B-160203093
3
Introduction
If we see the GDP indicators, this is Y=C+I+G when the economy is closed. That means the product
produced in an entity is only consumed by the peoples of that entity only and also they do not purchase
any foreign product. But when the economy is open people can purchase foreign product and also can
sell their produced product to the people who are not belongs to their entity. So then the GDP
indicators become Y=C+I+G+NX. NX refers to Net Exports. This can be got by subtracting Net import
from Net export.
Economy of Bangladesh
The market based economy of Bangladesh is the 42nd largest in the world in nominal terms having $1751
per capita nominal GDP. According to IMF Bangladesh’s economy is the second fastest growing major
economy of 2016 with a rate of 7.1%.
It has public debt at the rate of 31.9% of its GDP. In FY2018 it earns revenues at $24.36 billion and
expenses at $55.31 billion. In June 2018 it has $33.00 billion foreign reserves. This economy has grown
6% per year since 1996 though some factors like poor infrastructure, corruption, insufficient power
supplies, slow implementation of economic reforms are there. More than half of GDP is generated
through services sector; almost half of Bangladeshis are employed in the agricultural sector. Garments
export is the backbone of Bangladesh’s industrial sector and it is accounted for more than 80% of total
exports. This sector is growing continuously despite the need of working conditions improvements to
reduce high profile accidents of workers in the recent years, the inflow of hundreds of millions of
additional refugees from Burma will create pressure on the Bangladeshi government budget. Moreover,
because of unfavorable weather the country’s rice supplies declined in 2017.
Bangladesh’s economic freedom score is 55.1, making the economy 128th freest in the 2018 index. It’s
overall score has increased by 0.1 point because of the improvements in the scores for judicial
effectiveness and government integrity outpacing declines in property rights, trade freedom and labor
freedom. Bangladesh is ranked 29th among 43 countries in the Asia pacific region but it’s overall score is
below the regional and world averages. The main indicators of Bangladesh economy are GDP growth,
general government gross debt, inflation rate, current account. In 2018, GDP is 273.62 USD billions, GDP
per capital is 1660 USD.
General government gross debt is 34.704% of GDP in 2018. Inflation rate is 5.8% in 2018 and current
account is 1.3% of GDP, In 2018 per capital income was $4561 (PPP) and US $1754 (nominal).
Trade is moderately important to Bangladesh’s economy, the combined value of export imports equals
38% of GDP.1
1
Economy of Bangladesh(Wikipedia)
4
Imports of Bangladesh
The imports of Bangladesh rapidly increases in recent years because of the recent some years because
of the 3 mega projects Padma Bridge, Ruppur Power Plant, Metro Rail.2 It impacts much on the import
level of Bangladesh in recent years. Bangladesh mostly imports food as well as the Nuclear reactors,
Boilers, Machinery, mechanical appliances, Cotton, Electrical machinery and equipment and parts
thereof, sound recorders and reproducers, television image and sound recorders and reproducers and
parts and accessories of such articles and many more. In the meantime Bangladesh imports rail from
Korea. The main import partners of Bangladesh is China(21.5%), India(12.2%), Singapore(9.2%),
European Union(6.2%), Hong Kong(5.5%) and others(45.3%) as well.3 In FY 2013 export of Bangladesh
was $34.1 billion. The next year it increase at 7.33% and it stood $36.6 billion. In the next year the
growth rate decrease to 3.01% and the export stood $37.7 billion. In FY 2015 the growth of export
slightly increased to 5.84% and the export became $39.9 billion. In FY 2017 the growth rate of export
became 9.00% and the export was $43.49 billion.4
Imports of Bangladesh Changing % of Imports
50 43.49 10.00%
37.7 39.9 9.00%
36.6
billion $ Imports
40 34.1 8.00%
7.33%
6.00% 5.84%
30
4.00%
20 3.01%
2.00%
10 0.00%
0 -2.00% 2013 2014 2015 2016 2017
2013 2014 2015 2016 2017 -4.00% -4.00%
-6.00%
Exports of Bangladesh
The export of Bangladesh has a phenomenal change in last decades. The readymade garment sector has
change the form of the sector of export. It became the major sector of the export. The export firstly was
largely dependent on agricultural products like tea, jute, fishes like hilsa and shrimp. But in the recent
decades the scenario totally changed. Now the export of Bangladesh hugely dependent on the
readymade garments products. Bangladesh exports mainly textile, garments, leather and leather goods,
pharmaceuticals and agricultural products. The main export partners are European Union (58.2%), USA
(16.9%), Japan (3.1%), Canada (3.0%), India (2.4%), Australia (1.9%), China (1.9%), Southeast Asia (1.6%),
and others (11.6%).5 In FY 2013 the Imports of Bangladesh was $23.8 billion. But it increased at 25.21%
2
www.thedailystar.net/supplements/rething-urban-spaces/mega-projects-and-our-hopes-and-concerns-1538071
3
“Report: Cumulative Region-wise Data” EPB
4
www.focus-economics.com/countries/bangladesh
5
“Trade Profiles: Bangladesh” WTO
5
the very next year and stood $29.8 billion. But in the next FY it does not increased much. It increased
only 3.02% and stood 30.7 billion in FY 2015. In FY 2016 the growth rate increased to 8.79% and stood
$33.4 billion. And in FY 2017 the growth rate falls again to 1.86% and stood $34.02 billion.4
40
Exports of Bangladesh Changing % of Exports
33.4 34.02
29.8 30.7 30.00%
30
billion $ Exports
23.8 25.00% 25.21%
20.00%
20
15.00%
10 10.00% 8.79%
5.00% 4.00% 3.02% 1.86%
0 0.00%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Trade Balance
Trade Balance refers to the deference between the merchandise exports and the value of its
merchandise import. The trade balance of Bangladesh has always been negative. The import of
Bangladesh has always been greater than the export every year. The trade deficit of FY2013 was $10.3
billion. In the next year the trade deficit hugely decreases. At the rate of 33.98% it decreases to $6.8
billion. In FY2015 the trade deficit slightly increases at the rate of 2.94% to the $7.00 billion. In FY2016
the trade deficit again falls at the rate of 7.14% to $6.5 billion. But in FY2017 the trade deficit rises
hugely. It rises at the rate of 45.69% and become $9.47.
Trade Balance of Bangladesh Changing % of Trade Balance
0
60.00%
-2 2013 2014 2015 2016 2017
billion $ trade balance
45.69%
40.00%
-4
20.00%
-6
0.00% 2.94%
-8 -6.8 -6.5 -7.14%
-7
-20.00% 1 2 3 4
-10
-9.47 -33.98%
-10.3 -40.00%
-12
6
NX Vs Real Exchange Rate
export(2014) exchange rate export trade balance
jan 0.01296 92 -424
feb 0.01288 233 -206
march 0.01286 245 -237
april 0.01291 57 -383
may 0.01288 82 -331
june 0.01287 92 -313
july 0.01289 39 -485
aug 0.01293 34 -488
sep 0.01292 41 -340
oct 0.01293 36 -410
This data is for Bangladesh to USA in 2014 on month basis
𝑛𝑜𝑚𝑖𝑛𝑎𝑙 𝑒𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑟𝑎𝑡𝑒 ∗ 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑑𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑔𝑜𝑜𝑑𝑠
Real exchange rate=
𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑓𝑜𝑟𝑒𝑖𝑔𝑛 𝑔𝑜𝑜𝑑𝑠
1.When exchange rate is high , price of domestic goods also high than foreign goods
Real Exchange rate
Price of domestic goods
good > Price of foreign goods
good
Exports
< Imports
good good
(So we can say at high exchange rate out export will be low than the lower exchange rate)
2.When exchange rate is low , price of domestic goods also low than foreign goods
Real Exchange rate
good
Price of domestic goods < Price of foreign goods
good
Exports > Imports
good good 7
Net export/Trade balance vs policy vs unemployment
NX= export – import
Reduction in transaction barriers will increase trade balance. Trade liberalization is an important word.
While the Ricardian model predicts that trade liberalization (or tari⁄reduction) will result in a reduction
in unemployment,
The basic framework of the rst model is Ricardian in that the only factor of production is labor and trade
is based on relative technological di⁄erences.
Trade in a two-sector Ricardian model results in an increase in the value of the marginal
product of labor in one of the sectors (the export sector) due to an increase in the domestic
relative price of the good produced in that sector. Since the other sector (the import-
competing sector), where the marginal product of labor would have been lower, cannot
survive trade liberalization, the economywide value of marginal product of labor also goes up.
There is more investment in job search and the posting of jobs and we get a reduction in
unemployment
How Net export increases GDP with numerical example:
GDP = private consumption spending + investments + government spending + (exports - imports)
GDP = private consumption spending + investments + government spending +NX
NX= GDP-private consumption spending -investments -government spending
GDP = private consumption spending + investments + government spending +NX
NX= GDP-private consumption spending -investments -government spending
Trade balance/Net export GDP
( if other things remain constant)
(this example for simplifying the model to understand.so this is not real )
GDP=?
consumption spending=5
8
Investments=5
Government spending=3
Exports=7
Imports=2
GDP= consumption spending + investments + government spending + (exports - imports)
=5+5+3+(7-2)
=18
(Think that consumption spending , investments and government spending constant)
NX vs GDP if other things are not constant
Now export =11
Imports=4
GDP= consumption spending + investments + government spending + (exports - imports)
=5+5+3+(11-4)
=20
Here NX is increasing GDP
But another situation is
consumption spending =3
Investments =4
government spending =4
export =11
Imports=4
GDP= consumption spending + investments + government spending + (exports - imports)
= 3+4+4+(11-4)
=17
(though NX is increasing but GDP does not increasing for decreasing on spending , investments and
government spending )
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All links where we collect data
1) https://bdnews24.com/economy/2018/07/27/bangladesh-sees-record-jump-in-lcs-as-imports-surge
2) https://www.dhakatribune.com/opinion/special/2017/12/21/export-growth-fails-keep-pace-
economic-growth
3) https://www.thebalance.com/what-is-balance-of-payments-components-and-deficit-3306278
4) https://www.economics.uci.edu/files/docs/workingpapers/2007-08/ranjan-08.pdf
5) https://www.researchgate.net/profile/AK_Haque/publication/267862068_Impact_of_World_Oil_Pri
ce_Rise_on_the_Economy_of_Bangladesh/links/55ad279908aed614b097600b/Impact-of-World-Oil-
Price-Rise-on-the-Economy-of-Bangladesh.pdf?origin=publication_detail
6) https://www.census.gov/foreign-trade/balance/c5380.html
7) https://www.xe.com/currencycharts/?from=BDT&to=USD&view=5Y
8) https://tradingeconomics.com/bangladesh/exports
9) https://www.quora.com/topic/Logins
10) www.bb.org.bd
11) www.investopedia.com
12) www.policonomics.com
13) www.stockexchange.com
14) 14.www.epb.gov.bd
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