Trend Analysis of inflation of Bangladesh the last 10 years:

2020-2021

Bangladesh's average inflation rate in fiscal year (FY) 2020-21 was recorded at 5.56 per cent, up
0.16 percentage points from the government's target of 5.4 per cent, official data disclosed
However, the 12-month average inflation rate was 0.09 percentage points lower than 5.65 per
cent recorded in FY2020, according to the Bangladesh Bureau of Statistics (BBS). For FY 2021-
2022, the government has set a target to keep inflation within 5.3 per cent. Meanwhile, the point-
to-point inflation rate in June was recorded at 5.64 per cent, the highest in eight months as prices
of some commodities went higher. Monthly inflation was previously the highest at 6.44 per cent
last October, the state stats agency revealed. Overall point-to-point inflation in June rose by 38
basis points to 5.64 per cent from 5.26 per cent in May, it showed. June 2020, the rate was
recorded at 6.02 per cent. A senior BBS official said consumer price index of items like food,
beverage, tobacco, clothing, footwear, rent, fuel, lighting, furniture, household equipment,
medical expenses, education and cultural services maintained a higher trend in June 2021.Covid-
19's impact on the supply chain was one of the key factors for higher inflationary pressure during
the period in question, he told the FE. In June, the BBS recorded a big jump in food inflation.
Food inflation surged by 0.58 percentage points to 5.45 per cent last month compared to May's
4.87 per cent. Non-food inflation also went up by 0.08 percentage points to 5.94 per cent during
the period under review than that of 5.86 per cent in May. Another BBS official said prices of
rice, flour, edible oil and some vegetables were showing an upturn which has been reflected in
last month's inflation. Besides, rising expenditure in medical services during the ongoing
coronavirus pandemic also fueled the inflationary pressure, he added. Meanwhile, point-to-point
inflation in rural Bangladesh also rose to 5.84 per cent in June from May's 5.28 per cent, the BBS
data showed. Food inflation at village level was logged at 6.04 per cent, up from 5.25 per cent in
May. Non-food inflation surged to 5.46 per cent in June from that of 5.33 per cent in May.
According to the BBS data, inflation in urban areas also increased to 5.29 per cent in June from
that of 5.24 per cent in May. Food inflation rate in urban Bangladesh was recorded at 4.14 per
cent in June, up from 4.03 per cent in May. Non-food inflation rate also increased during the
period to 6.59 per cent from May's 6.56 per cent. The bureau also unveiled wage rate index
which fell by 0.44 percentage points in June. The index dropped to 5.97 per cent in June from
that of 6.41 per cent in May.

Following years also covered bellow:

2012

Historical records have shown that inflation have increase over the time with the change in
monetary policy. Using the data from January 2007 to October 2011, we can say that inflation
movement in Bangladesh has been cyclic. There was a sharp increase, which almost reached
double-digit level during October-November 2007. After that it had been relatively stable
throughout the year 2008. But after that there was a sharp decline from end of 2008 through
January 2009. Again, in January 2009, it increased sharply but did not touch the double-digit
level. In 2011, it again reached the double digital level. The inflation rate in Bangladesh was
recorded at 7.39 percent in September of 2012. Historically, from 2001 until 2012, Bangladesh
Inflation Rate averaged 8.26 Percent reaching an all-time high of 11.97 Percent in September
of 2011 and a record low of 1.66 Percent in June of 2001.

2013

The inflation rate in Bangladesh was recorded at 7.86 percent in May of 2013. The Bangladesh
Bureau of Statistics reports the inflation rates in Bangladesh. Historically, from 1994 till 2013,
Bangladesh’s inflation rate averaged 6.60 Percent reaching an all-time high of 12.71 Percent in
December of 1998 and a record low of -0.02 Percent in December of 1996. In Bangladesh, the
inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of
goods. The market intermediaries are the last agents to charge higher prices. Recently most of
our economists think that devaluation or depreciation of the exchange rate of Taka is another
cause of inflation, with whom the Governor of Bangladesh Bank (BB) disagreed. It matters little
how the devaluation is related to inflation rate. We are in an economic stage of recession with
lower output and income, higher unemployment.

2014

Figure 1(d) shows that there has been a continuous increase in the supply of currency with non-bank and
demand deposit between the periods of 1979-80 and 2012-13 except in 2001-02 when the supply of
money had been reduced sharply by the government. The reason for sharp decline may be controlling the
inflationary pressure. Figure 1(e) shows that amount of money and liquidity in the economy continues to
increase from 1979-80 to 2012- 13. Figure 1(f) shows that government revenue continues to increase
from 1979-80 till 2013-14. Figure 1(g) shows that the government expenditure continues to increase from
1979-80 to 2013-14. Figure 1(h) shows that although there are larger hikes in 1985-86 and 1991-92 but
the growth in RGDP remains stable from 1979- 80 to 2013-14. The projected figures of all the
macroeconomic variables have been showed in two phases, namely 5 years (2016-17) and ten years
(2022-23). All the estimates except for inflation rate and interest rate on deposit are showing significant
upward trend.

2015

The government of Bangladesh has historically employed expansionary monetary policies within the
economy which can be easily understood from th M2 growth in the country. A clear picture of between
1990 and 2016 is given in Figure 2. Bangladesh experienced a prolific M2 worth BDT 9387.21 billion to
BDT 9540.54 billion between 2015 and 2016. Bangladesh has a mean annual growth in its M2 worth BDT
277.17 billion over the last two and a half decades or so. During this period, the M2 has more than
tripled in value which clearly depicts the government’s expansionary monetary policy. The country’s M2
emerged to an all-time peak of BDT 9540.54 billion in December 2016 while the lowest recorded drop in
M2 to BDT 207.37 billion was found around March 1990

2016

Bangladesh is a South Asian developing country. After a series of comprehensive stabilizing measures
the country reached a solid economic growth and macroeconomic stability in the early 1990s. For this,
the country performed a steady economic growth over the early 1990s than that of 1980s. However, at
the end of the decade the economy fallen a deep critical state in the form of increasing inflationary
pressures, reducing foreign exchange reserves and deteriorating government’s budgetary balances and
unfavorable balance of payment situation (Mahmud, 1997). Figure 1 shows that in the second half of
1980s, the country witnessed two-digit inflation where the growth rate of real GDP was on average
below 4%. However, over the first half of the 1990s, inflation rate on average was 5.72% while GDP

2017

growth rate was 4.53% and in the second half of the 1990s the inflation rate was reduced on- average to
5.13% while the growth rate of GDP continued to increase on-average to 4.83%. Again, inflation rate
increased on average to 5.52% and 7.66% in the first and second half of the 2000s respectively, the
growth rate of GDP also continued to increase on-average to 5.10% and 6.07% respectively. In 2011 to
2015 the growth rate of real GDP was increased onaverage to 6.33% but the inflation rate decreased on
average to 7.53%. However, on the basis of a visual observation.

produce for rising in price which translates to economic growth. On the other hand, Fischer and
Modigliani (1978) found a nonlinear and negative relationship between the rate of inflation and
economic growth by the new growth theory mechanisms (Barro, 1995), (Bruno and Easterly, 1995) and
(Malla, 1997) (Faria and Carneiro, 2001) and (Michael, 2008). They stated that inflation confines
economic growth largely by reducing the efficiency of investment compare to its scale. At the household
stage, inflation imposes a heavy burden on those with fixed earnings; inflation comparatively favors
debtors at the expense of creditors; at the firm level, the effect of inflation is called the “menu cost.”
Rotemberg (1982; 1983), Dmaziger (1988), Benabou and Konieezny (1994), Yap (1996), Valdovinoz
(2003), and Guerrero (2006) said that, as inflation increase the output price of the firm, so a new price
level would be determined for the customers. A lot of empirical studies failed to find any conclusive
evidence of either a positive or a negative relationship between inflation and economic

2018

The data came primarily from the ITC Bangladesh Survey Waves 1–4, a cohort survey of tobacco users
and non-users aged 15 and older with multistage complex survey design conducted in 2009, 2010,
2011–2012 and 2014–2015.11 The survey protocol was approved by the Ethical Review Committees of
the University of Waterloo, Waterloo, Canada, and Bangladesh Medical Research Council, Dhaka,
Bangladesh. Self-reported data on prices of tobacco products paid in the last purchase, household
income and other individual and household-specific sociodemographic characteristics from 6463
observations on cigarette smokers and 1733 observations on bidi smokers pooled over the four waves
and 407 observations on smokeless tobacco users pooled over the third and the fourth waves were
used. These observations include both exclusive and multiple users of tobacco products. Cross-sectional
individual-level survey weights were used for representativeness of the sample estimates. In addition,
the cross-sectional weights were multiplied by the daily use of tobacco (eg, number of cigarettes/bidis
smoked per day, frequency of smokeless tobacco use) to assign higher weight to individuals with heavier
tobacco consumption. The analysis was restricted to daily tobacco users.

2019

The average cigarette price generally increased in real terms for the four brand tiers (low price,
medium price, high price and premium) between 2009 and 2014–2015 (figure 1). On average,
inflation-adjusted cigarette prices for all brands increased at an annual rate of 6.9% between
2009 and 2014–2015. This increase in real price of cigarettes is attributable to the upward
adjustment of the administered price every year above the annual inflation rate along with minor
increases in the tax rates by the NBR (table 1). The per capita GDP increased at an annual
average rate of 5% over the same period.14 The faster growth in average price compared with
per capita GDP may lead one to conclude that affordability of cigarettes has been decreasing in
Bangladesh in the recent past. However, per capita annual household income in the ITC sample
increased faster than per capita GDP between 2009 and 2014–2015 from 31 740 Bangladeshi
taka (BDT) to 49 832 BDT in 2014 prices, implying 9% annual rate of growth.

The average price of bidis decreased at an annual rate of 7.3% between 2009 and 2014–2015
(figure 1) when the adjustments in the tax rates or the tariff values were minimal (table 2). In
contrast, the average price of smokeless tobacco products almost doubled between 2011–2012
and 2014–2015 (figure 1) attributable in part to the tripling of the tax rate during this period
(table 3).

As shown in figure 2A, the RIPs for bidis (4.8%) and for all cigarette brands (16.4%) in 2009 are
much higher than the earlier estimates of 1.2% and 5%, respectively, based on average price and
per capita GDP data.9 This divergence is attributable to two factors. First, the former study used
aggregate-level measures that fail to take account of price and income distributions as well as the
effect of price minimisation or tax avoidance behaviour on the paid prices. Second, the per capita
GDP used in the former studies is much higher than the per capita household income used in the
present study and therefore overstates the affordability of tobacco products.

2020

In Bangladesh, compared to the previous year (2018), the economy expanded by 8.2% in 2019, as
measured by the national GDP. The Bangladeshi GDP growth rate (Figure 1) reached anaverage all-time
high of 8.2% in 2019, compared to an average increase of 5.9% between 1994 and 2019, and a recorded
low of 4.08% in 1994. The Bangladeshi inflation rate in recent fiscal years was 6.4% in 2015, 6.7% in 2016
and 6.9% in 2017. The Bangladeshi economy, despite natural disasters, has continued to register a
growth rate of around 6% despite external shocks and political unrest over the last few years

1 . This controversial issue confirm from the findings of empirical study of Mundell (1965) and Tobin
(1965), where they found a positive relationship between the inflation and the rate of capital
accumulation, that means a positive relationship to the rate of economic growth2 . Their point is that as
money and capital substitutable, increasing inflation means increasing capital accumulation by changing
money to capital and thereby increasing economic growth (Gregorio, 1996). Dornbusch et al. (1993;
1996) found that in short run the relationship between inflation and economic growth is positive.