Intro:

This report provides an economic analysis and comparison on the macroeconomic overview of
Bangladesh and Nepal, two south Asian economies, with data during the time period 2009-2019.
Bangladesh, a rising developing economy in the continent of Asia, has made remarkable gains over the
decade. Having been one of the most successful development achieving countries during Millennium
Development Goal era, it continues to do well in terms of the Sustainable Development Goals. This also
includes having development plans for 2030, one of which is to bring poverty to zero. Nepal on the other
hand, a poor economy in Asia in terms of both infrastructure and economic development did not enjoy
the same gains. It is largely dependent on agriculture and remittances. Economic development has been
complicated and affected by the constant change in political scenarios which has ranged from monarchy
to being ruled by the Communist party in 2019. Agriculture remains Nepal's principal economic activity,
employing about 65% of the population and providing 31.7% of GDP. GDP is also heavily dependent on
remittances (9.1%) of foreign workers. Subsequently, economic development in social services and
infrastructure in Nepal has not made dramatic progress. However, in the last decade the economy has
added over 4 million jobs and increased quality of jobs as well. Having experienced a low unemployment
as shown in the figures below. This report uses data of GDP, GDP growth, Inflation rate, Unemployment
rate, and Trade of the two economies which was taken from the World Bank database. In the following
sections, these indicators have been discussed with graphs.

Gross Domestic Product (GDP):

Figure: The GDP of Bangladesh and Nepal.

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and
services produced within a country's borders in a specific time period. As a broad measure of overall
domestic production, it functions as a comprehensive scorecard of a given country’s economic health
As seen with a continued average economic growth of nearly 7% in the last ten years, Bangladesh now
stands as an emerging trade and investment economy. The steady growth in export business, hard-
working labour force and committed entrepreneurs supported by the pro-business, pro-investment
policies of the Government are leading Bangladesh towards the line of global business competency.
Economic development through international and regional trade with its trade partners and an
increasing flow of remittance by expatriate Bangladeshi citizens living across the world have helped the
country achieve and retain an impressive economic status. This has also led to the International
Monetary Fund (IMF) in its World Economic Outlook, 2019, has ranked Bangladesh as the 41 st.

Nepal is one of the least developed countries in the world and relies heavily on foreign aid. The main
sector of the economy is agriculture, which employs over 70 percent of the population and accounts for
33 percent of GDP. As Nepal is home to the highest mountains in the world, tourism has been steadily
growing in importance and is an important source of revenue. Also, the country has been working on
exploiting hydroelectric power.

As seen in the figure above, Bangladesh has always had a much higher GDP than Nepal. This is because
of the previously mentioned greater government expenditure due to all infrastructure development
projects, greater exports and imports, and higher consumption and investment due having a massive
population advantage on Nepal. Nepal, however banks most of its revenue from the tourism sector. On
the other hand, Nepal is not developed in its other sectors, having reliable income only coming from the
agriculture sector and tourism sector, leading it to have less GDP than Bangladesh. However, Nepal has
had good GDP growth in the last decade which shown below.

Figure: The GDP growth rate of Bangladesh and Nepal

As seen in the figure, Bangladesh has a constant increasing GDP growth rate increasing from
approximately 5% in 2009 to 8% in 2019. Nepal however, has a changing GDP growth rate, increasing
and decreasing every other year. The GDP growth rate hit its lowest in 2016 at approximately 0.86%
which had started to fall in 2014. The following year, in 2017 Nepal experienced its highest GDP growth
rate at approximately more than 8%. This is because in 2017, Nepal had seen huge contributions to GDP,
from consumption and government expenditure, government expenditure had increased by almost 92%
from the year before according Nepal Economic Outlook done by Kathmandu University.

Inflation rate

Figure: Inflation rate of Bangladesh and Nepal

In economics, inflation is a sustained rise in the general price level of goods and services in an economy
over a period of time. When the general price level increases, each unit of currency buys less good and
services. Consequently, inflation reflects reduction of real value in the medium of exchange and unit of
account within the economy. That is why a fundamental macroeconomic purpose for a country to
achieve price stability and the monetary authority to set policies accordingly to prevent any persistent
rise in the general price level.

Money supply, international prices, exchange rate, real output, government expenditure and
expectation factors as major sources of inflation in Nepal. Along with the monetary policy not being
efficient of the country, these factors were driving the inflation rates higher. This was a known issue in
Nepal due to the political and economic turmoil it has faced in the last decade. In Bangladesh, food
inflation has always been high throughout the decade, and depreciation of taka has led to higher levels
of inflation, causing imported goods to cost more taka. And with exporters finding more demand in
international markets, they too refuse to decrease prices leading to increase in price in both imported
and exported goods.

Over the last decade, out of the two countries Bangladesh has faced the highest inflation rate at
approximately 11% in 2011 followed by a drastic drop in the next year. This was the highest Bangladesh
had in the last 32 years, and can be explained by economic or political turmoil which was present in the
economy in that year. After that it has been constantly between approximately 7% to 5.8%. The highest
Nepal faced was also approximately 11%, but has been decreasing over the decade, but did face a rise in
2016 at 8.5%, on average it still has higher inflation rate than Bangladesh.

Unemployment

Figure: Unemployment rate of Bangladesh and Nepal

Unemployment is a term referring to individuals who are employable and seeking a job but are unable
to find a job. Furthermore, it is those people in the workforce or pool of people who are available for
work that does not have an appropriate job. Usually measured by the unemployment rate, which is
dividing the number of unemployed people by the total number of people in the workforce,
unemployment serves as one of the indicators of an economy’s status.

Bangladesh has failed to create adequate jobs, especially for the rising young population, despite higher
economic growth in recent years. The job market is rather shrinking as capital-intensive industries are
taking over the places of labor-intensive industries. Although Bangladesh's private sector creates more
employment opportunities than the public sector, private investment as percentage of gross domestic
product has remained stalled for quite some time, a stagnation which is a major reason for high
unemployment rate. Nepal created nearly four million jobs over the past decade, and average job
quality increased significantly, according to the World Bank. However, most jobs are informal and
concentrate in relatively low productivity sectors, while most firms are micro-sized with one or two
employees, and target small local markets rather than exporting or connecting to regional or global
value chains.
Nepal has generally had low unemployment rate in the last 10 years, which is constantly 1.4%. Having
added 4 million jobs as mentioned before, and a generally small population compared to Bangladesh
helps keep the unemployment rate constantly low. Compared to Nepal, Bangladesh however faces a
higher unemployment rate which was highest in 2009 at 5%, the lowest in the next year at 3.2% and
then constantly around 4%. This is due to the surplus of qualified workers entering the job market, but
limited amount of jobs being available.

Figure: Population growth of Bangladesh and Nepal

Trade

Figure: Sum of exports and imports of Bangladesh and Nepal.

Trade is the exchange of capital, goods, and services from one economy to another because there is a
need or want of goods or services for ones economy’s goods and services in another. And in most
countries, trade holds a significant share of the GDP every year.

Trade represented 38.2% of Bangladesh GDP in 2018 according to the World Bank. The main export
products are clothes, raw jute and its derived products, leather, fish and frozen seafood, exporting
mainly to the European Union, the United States and China. Bangladesh mainly imports machinery and
equipment, chemical products, steel & metals, cement, food and oil derived products, importing mainly
from Thailand, India, China, Indonesia and Singapore. In 2018, exports from Bangladesh rose further
from record levels of a year earlier, reaching USD 39.3 billion due to stronger garment sales. The imports
of goods was equal to USD 60.5 billion in 2018. Since becoming independent, Bangladesh has had a
negative trade balance, with its deficit being financed by international aid and expatriate transfers.
Nepal want to establish an export-oriented economy. Companies exporting more than 90% of their
goods are exempted from custom duties, excise duties and sales taxes. However, there are major
barriers to the development of trade, such as lack of skilled labor force, low level of advanced
technology, difficult geographical accessibility, limited domestic market and high import duties.
Historically, for many years Nepal’s trade balance has been in deficit. Even if the exports have not been
greatly hurt by the global economic crisis, the deficit has been deepening following an increase in
imports. Nepal’s main trading partners are India, China, Bangladesh, and USA. The country mainly
exports clothing, carpets, handicrafts, leather and jute products, vegetables and cereals Nepal imports
oil and oil products, machinery & equipment and electronics.

As seen in the figure above, Bangladesh has always had a massive advantage on Nepal in the trading
sectors, with the advantage increasing every year. However that is to be expecting looking at the
markets, industries and work force of both countries available. Bangladesh simply has better markets
(larger population with more income), industries (RNG and textiles and such), and work force (again
larger population) to support more trade.

Conclusion
This report provides a macroeconomic overview of Bangladesh and Nepal, simultaneously comparing
them as well. While Bangladesh, has much greater GDP and Trade than Nepal. Nepal has shown mush
lower unemployment rate, and similar average inflation rate over the decade. Nepal has also shown
consistent growth rate in GDP recently after having a volatile rate which was eventually followed by a
great fall. Even though Nepal is still one of the least developed countries in the world, it still has
potential with it experiencing a growth in population in recent years. Nepal was chosen as the other
country for this macroeconomic overview paper as it can follow some steps Bangladesh can take in
development, in transforming into a developing country in the years to come.