Report on Economic Conditions of Bangladesh from

1965 to 2021

Course: BUS530
Section: 02

Submitted to:
Dr. Asad Karim Khan Priyo
Associate Professor and Chair
Department of Economics
School of Business and Economics
North South University
Submitted by:
Name ID
Mst. Sintthia Aktar 2225285660
Behruz Islam Ananta 2225256660
Rahat Ahmed Bhuiyan 2225170660
Md. Shahariar Koushik 2225397660
Ashak Anowar 2225354660
Date of Submission: December 27, 2022
 ACKNOWLEDGEMENT

We admire and thank our dearest faculty, Dr. Asad Karim Khan Priyo, Associate Professor

& Chair (Department of Economics, School of Business and Economics, North South

University). His teaching style, guidelines, motivation, and suggestions from the beginning to

the end of the semester in BUS530 ‘Economic Condition Analysis’ helped us perform

efficiently on this project. We want to thank our excellent faculty for his assistance in supplying

the necessary equipment.

We also want to thank everyone who worked hard and contributed to the creation of the report.

We consider ourselves fortunate to have had their support.

 Executive Summary

In this report, we have identified the ‘‘Economic Conditions of Bangladesh from 1965 to

2021.’’ We have gathered information from World bank national accounts data and analyzed

the trends. We used EXCEL software to generate the graphs and show the ‘Economic

Conditions of Bangladesh.’ From the gathered data, we constructed regression analysis to

explain more precisely. By the trend, we can get an idea of the growth and decline of our

economy. From 1965 to 2021, cyclical components experienced expansionary and inflationary

circumstances. We would aim to construct a measurement of the critical element of Real GDP

for this objective.

 Table of Contents

1. Overview of Bangladesh Economy ............................................................................. 1

2. Economic Growth of Bangladesh ............................................................................... 1

3. Methodology ................................................................................................................. 1

4. Data Analysis ................................................................................................................ 2

5. Multivariate Regression Analysis ............................................................................. 11

6. Conclusion .................................................................................................................. 16

7. References ................................................................................................................... 17
 Overview of Bangladesh Economy

We are doing an economic conditions analysis from 1965 to 2021, and before 1971 Bangladesh

was under West Pakistan. After the war in 1971, Bangladesh got a newly independent state. In

1972 GDP was $6.29B, growth was negative (-13.97%), and GDP in 2021 was $416.26 billion

(Bangladesh GDP 1960-2022). The poverty rate went down, and Bangladesh's economy is

growing fast right now.

Economic Growth of Bangladesh

Because of war, many problems, like transportation damage, occurred. From a socialist

standpoint, the government nationalized all of the country's industries, resulting in a GDP

growth rate of 3.8% between 1973 and 1980. The government adjusted its thinking, opening

up several industries to private and overseas investment, and GDP growth picked up steam

(Independent, Evolution of Bangladesh economy). Agriculture, the RMG sector, etc., started

developing. Now Bangladesh is improving through infrastructure development, expenditure on

research, and diversification of export items. Because of the Covid-19 Pandemic and the recent

Russia – Ukraine war, the world is facing some economic crises, including Bangladesh. But

after passing the pandemic, Bangladesh is doing good in recovering from its situation, keeping

the war effects in the head.

Methodology

We have used the secondary data collection method. We have collected data from World Bank

because on their website, all the vital information is given and well organized. The collected

data was from 1965 to 2021. After the data collection was completed, we used HP Filter in

Microsoft Excel, and from the excel, we created graphs, linear regression analysis, and trends

of the variables.

Page | 1
 Data Analysis

In this part we will analyze and interpret the trend and cyclical components of real GDP,

consumption, investment, government expenditure, export and import to provide a better

understanding of the evolution of Bangladesh’s economy from 1965 to 2021.

Real GDP Analysis (Trend and Cyclical)

Real GDP is the value of the entire output produced annually within a country’s border,

adjusted for price changes.

Trend Analysis of Real GDP

Real GDP and Trend

300000000000.0000
250000000000.0000
200000000000.0000
150000000000.0000
100000000000.0000
50000000000.0000
0.0000
Year 1967

Year 1989
Year 1965

Year 1969
Year 1971
Year 1973
Year 1975
Year 1977
Year 1979
Year 1981
Year 1983
Year 1985
Year 1987

Year 1991
Year 1993
Year 1995
Year 1997
Year 1999
Year 2001
Year 2003
Year 2005
Year 2007
Year 2009
Year 2011
Year 2013
Year 2015
Year 2017
Year 2019
Year 2021

Real GDP Trend

Interpretation: The graph represents real GDP of Bangladesh and its trend from 1965-2021.

During 1965-1970, Bangladesh (Formerly known as East Pakistan) had a stagnant economy.

Things did not improve even after the 1971 war as the famine of 1974 further delayed the

economic progress. After overcoming the political unrest in 1975 and 1977, the country’s real

GDP started to increase from 1978-1990. Bangladesh experienced noticeable GDP growth after

Page | 2
the success of the RMG industry along with the construction of feeder roads from 1988-1997.

Though Covid-19 slowed down the real GDP increase in 2020, the trend continues to rise.

Cyclical Analysis of Real GDP

15.0000%
Cyclical Component of Real GDP
10.0000%

5.0000%

0.0000%

-5.0000%

-10.0000%

-15.0000%
Year 1997
Year 1965
Year 1967
Year 1969
Year 1971
Year 1973
Year 1975
Year 1977
Year 1979
Year 1981
Year 1983
Year 1985
Year 1987
Year 1989
Year 1991
Year 1993
Year 1995

Year 1999
Year 2001
Year 2003
Year 2005
Year 2007
Year 2009
Year 2011
Year 2013
Year 2015
Year 2017
Year 2019
Year 2021
Interpretation: The graph shows a noticeable expansion in the cycle from 1967-1970. Which

was the result of development projects like the Kaptai Dam hydroelectric project in 1965. After

1970, almost a vertical contraction exists as the cycle reaches its trough in 1972. There were

more unstable fluctuations from 1974-1990 due to political unrest and rigid policies. Since

1991, the cycle has remained quite stable with fluctuations mainly caused by global economic

impact. The decline in 2020 was caused by Covid-19, but the expansion in 2021 signifies that

real GDP may grow in future.

Consumption Analysis (Trend and Cyclical)

Consumption expenditure is the sum of household spending on durable goods, nondurable

goods, and services. It is usually the largest spending component of GDP in most economies.

Page | 3
Trend Analysis of Consumption

Consumption and Trend

250000000000.0000
200000000000.0000
150000000000.0000
100000000000.0000
50000000000.0000
0.0000 Year 1977

Year 2009
Year 1965
Year 1967
Year 1969
Year 1971
Year 1973
Year 1975

Year 1979
Year 1981
Year 1983
Year 1985
Year 1987
Year 1989
Year 1991
Year 1993
Year 1995
Year 1997
Year 1999
Year 2001
Year 2003
Year 2005
Year 2007

Year 2011
Year 2013
Year 2015
Year 2017
Year 2019
Year 2021
Consumption Trend

Interpretation: Graphically, the trend in consumption from 1965-1972 was almost stagnant.

Rather, a downward trend from 1974-1978 was caused by the famine of 1974. From 1979, the

consumption expenditure trend went upward as improvement in income and overall

employment level contributed to the subsequent rise in consumption. Even Covid-19 did not

slow down this increase in consumption.

Cyclical Analysis of Consumption

Cyclical Component of Consumption

20.0000%
15.0000%
10.0000%
5.0000%
0.0000%
-5.0000%
-10.0000%
-15.0000%
-20.0000%
Year 1983

Year 2005
Year 1965
Year 1967
Year 1969
Year 1971
Year 1973
Year 1975
Year 1977
Year 1979
Year 1981

Year 1985
Year 1987
Year 1989
Year 1991
Year 1993
Year 1995
Year 1997
Year 1999
Year 2001
Year 2003

Year 2007
Year 2009
Year 2011
Year 2013
Year 2015
Year 2017
Year 2019
Year 2021

Page | 4
Interpretation: The cyclical component of consumption expenditure reached the highest peak

in 1970 and the lowest trough in 1977. Since then, there has been constant fluctuations and it

became somewhat stabilized after 1984. Even in 2018, there was a contractionary decline

which reached its trough when Covid-19 struck in 2020. Yet, there was a consumption spike

in 2021.

Investment Analysis (Trend and Cyclical)

From macroeconomic perspective, Investment is the sum of all purchases of newly produced

capital goods, changes in business inventories and purchases of the residential housing.

Trend Analysis of Investment

Investment and Trend

100000000000.0000
80000000000.0000
60000000000.0000
40000000000.0000
20000000000.0000
0.0000
Year 1993

Year 2021
Year 1965
Year 1967
Year 1969
Year 1971
Year 1973
Year 1975
Year 1977
Year 1979
Year 1981
Year 1983
Year 1985
Year 1987
Year 1989
Year 1991

Year 1995
Year 1997
Year 1999
Year 2001
Year 2003
Year 2005
Year 2007
Year 2009
Year 2011
Year 2013
Year 2015
Year 2017
Year 2019

Investment Trend

Interpretation: Graphically, there is barely any increase in investment from 1965-1977. After

1978, the increase in investment is achieved by the government policy to gradually withdraw

government intervention and encourage the private sector in all spheres of economic activity

(Haque, 2012). The investment in RMG sector, telecommunications, manufacturing and

service sectors have boosted the investment in Bangladesh since 1990 and this trend continued

ever since.

Page | 5
Cyclical Analysis of Investment

Cyclical Component
60.0000%

40.0000%

20.0000%

0.0000%

-20.0000%

-40.0000%

-60.0000%

-80.0000%
Year 1979

Year 2001
Year 1965
Year 1967
Year 1969
Year 1971
Year 1973
Year 1975
Year 1977

Year 1981
Year 1983
Year 1985
Year 1987
Year 1989
Year 1991
Year 1993
Year 1995
Year 1997
Year 1999

Year 2003
Year 2005
Year 2007
Year 2009
Year 2011
Year 2013
Year 2015
Year 2017
Year 2019
Year 2021
Interpretation: According to the cyclical component of investment, after 1972 it greatly

increased with an intention to rebuild the nation. But there have still been major fluctuations

from 1975-1981. Since 1982, the investment cycle gradually went downward till 1992. From

1993 increase in investment was caused by the policy changes which inspired more private

investment. Recently, the investment cycle is more stable compared to the pre-liberation

period.

Government Expenditure Analysis (Trend and Cyclical)

Government spending will be used to pay for social goods and services purchasing. According

to Keynesian economists, government spending is essential for bringing the Economy to long-

term balance. Government spending is increased when the Economy goes into a recession gap,

and decrease when it goes into an inflationary gap.

Page | 6
Trend Analysis of Government Expenditure

Interpretation: In this graph, we can see that government spending continuously increases

from 1965 to 2021. But there was fluctuation exist in this graph. One reasons for that fluctuation

between 1972 through 1996 is government spending increased moderately. In 1972,

government expenditure was less than the trend because of the war. Government expenditure

raised in 2019 because of the Covid-19 pandemic occurs.

Cyclical Analysis of Government Expenditure

Page | 7
Interpretation: From 1965 to 1973, Bangladesh's political condition could be better. Also,

from 1972 to 1975, it could have been better because it was challenging to invest money in the

economy of a war-torn country. After freedom, the government was forced to spend much

money on the nation's initial development.

Export Analysis (Trend & Cyclical)

Export is one of the significant contributors to Bangladesh's economic growth and GDP. But it

was slowly increasing after the liberation war.

Trend Analysis of Export

Interpretation: After the World Trade Center collapsed in 2001, the US economy crashed,

which caused a rapid decline in our export industry. In 2007, the recession took place, and

worldwide export growth decreased. After that, Bangladesh's export start increasing because

of the RMG sector increase the export. It dropped in 2019 because of Covid 19.

Page | 8
Cyclical Analysis of Export

Interpretation: After the liberation war, Bangladesh was focused on exporting jute and jute

products. The cost of meeting the people's fundamental necessities, particularly their health,

mainly fell on the government. However, the government is currently concentrating on

increasing exports. The significant political upheaval of the 2000s and the global SUB PRIME

economic crisis of 2007 negatively influenced the growth of exports.

Import Analysis (Trend & Cyclical)

Bangladesh needs foreign dependency to full fill the local demand.

Page | 9
Trend Analysis of Import

Interpretation: Import increased from 1968 to 1972 due to war; its production decreased. The

pace of change in imports was relatively modest between 1980 and 1994. As people grew

accustomed to buying foreign items, imports increased with the growth of export. At the end

of 2016–17 fiscal year, the trade imbalance was about $9.5 billion.

Cyclical Analysis of Import

Page | 10
Interpretation: Import industry saw two significant peaks in the years 1972 and 1980.

Following the liberation struggle, import necessities were required in 1972 to reconstruct a

nation that had endured conflict. We needed a significant quantity of machinery and equipment

to establish our infrastructure. We needed to import food grains to feed more than 70 million

people. The shifting import trends over 36 years. Its continuous fluctuations throughout time

may be seen. Due to changes in exchange rates, imports see periodic ups and downs. The export

varied in 2002-2003, falling to.21 points.

Multivariate Regression Analysis

When there is a more than one predictor variable, the multivariate Regression help to find a

relationship between a dependent variable and the Predictors variables (Independent). It is

mostly used to predict the behavior of dependent variable with the changes in independent

variable. The basic Multi regression equation is, Y = a + b1X1 + b2X2 + ……+ bkX; where

k denoted as independent variables.

Regression Statistics

Multiple R 0.919632

R Square 0.845723

Adjusted R Square 0.830598

Standard Error 0.012451

Observations 57

Page | 11
Interpretation: Multiple R is a correlation coefficient that measure the relationship between

Dependent variable and independent variables. Here the independent variables are

Consumptions (C), Investments (I), Government Expenditures (G), Exports (X), & Imports

(M). The value of Multiple R is 0.919632 is positive which we can interpret that the relationship

between GDP and the independent variable (C, I, G, X & M) is strong, the increases in these

independent variables also make positive change in GDP.

R Square is the coefficient of determination which explains how much variation of a dependent

variable is explained by the independent variables. In words, R square interpret the percentage

changes in dependent variable by the independent variables. Here, R Square value is 0.845723

which is 84.57% by this we can say 84.57% of deviation in the real GDP by the variation of

Consumptions (C), Investments (I), Government Expenditures (G), Exports (X), & Imports

(M).

Adjusted R Square is drive from R Square which predictors that are what significant

changes make in dependent variable by the independent variable. Here Adjusted R

Square is 0.830598 or 83.03% which conclude as 83.05% of the variation in Real GPD

happened by the variation in Consumptions (C), Investments (I), Government Expenditures

(G), Exports (X), & Imports (M).

Standard Error measure the average distance that fall from the regression line from the sample

value. In our calculation the Standard Errors is 0.12% which is a very small percentage that

shows our observant can be 0.12% fall from the regression line.

In our project we took 57 years (1965-2021) of data for each component, here our observant is

57 which is basically our sample size.

Page | 12
Interpretation: Anova is analysis of variance in the model which basically summarize

findings.

In this Anova table, df denotes as degrees of freedom, SS denotes as sum of squares, and MS

denotes as mean squares. SS regression indicating the amount of variance in a dependent

variable that can be explained by the variance in one or more associated independent variables

whereas SS value of Residual represents the variation not explained by the independent

variables.

In our regression model the number of independent(K) variable is 5, the df of regression

represent this number of independent variables.

However, the df of residual calculated as = n – (k + 1) = 57 – (5+1) = 41.

The F statistic in ANOVA: In our model numerator degrees of freedom is 4 and the

denominator degree of freedom is 52.

Based on this we found the critical value of F from the F distribution table which is 2.55. In

our Anova model we can see the F value is 55.91 which is much higher then the critical f value.

Lest assume the hypothesis: H0 = b2 = b3 = b4 = b5 = b6 =0

Ha = at least one of b2, b3, b4, b5, b6 does not equal zero

As here we see that our F value is higher than the critical value of F, we rejected the null

hypothesis that is at least one of b2, b3, b4, b5, b6 does not equal zero.

Significant f value corresponded by p value, in our model p value is nearly 0, which is which

is lower than the α of 0.05 so we rejected the null hypothesis as well.

Page | 13
 Regression Coefficient Table

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -0.00036 0.0016560 -0.217867 0.8284021 -0.003685 0.0029637

Consumption 0.602558 0.0635927 9.4752616 7.8408748 0.4748902 0.7302258

Investment 0.136844 0.0120720 11.335622 1.5136830 0.1126087 0.1610801

Govt Exp 0.017463 0.0114043 1.5312471 0.1318882 -0.005432 0.0403580

Export 0.045512 0.0141089 3.2257404 0.0021956 0.017186 0.0738368

Import -0.07028 0.0151162 -4.6491304 0.0000239 -0.100624 -0.0399304

From the table above, the multiple Regression coefficient table:

The Real GDP according to the Regression Coefficient table: -0.0003+0.602558(Consumption)

+0.136844 (Investment) +0.017463 (Govt Exp) +0.045512 (Export) -0.07028 (Import).

The intercept value of the coefficient tables is -0.00036, it suggests that the GDP would be -0.00036,

if there were no C+I+G+X-M, in the economy.

Coefficient Interpretation

Consumption: The consumption value is 0.60, which suggest that if (I+G+X-M) remain constant, if

consumption increase by 1-unit, Real GDP will increase by 0.60 unit.

Investment: The Investment value is 0.136, which suggest that if (C+G+X-M) remain constant, if

Investment increase by 1-unit, Real GDP will increase by 0.136 unit.

Page | 14
Govt Expenditure: The Govt Expenditure value is 0.017, which suggest that if (C+I+X-M) remain

constant, if Govt Expenditure increase by 1-unit, Real GDP will increase by 0.017 unit.

Export: The Export value is 0.045, which suggest that if (C+I+G(-M)) remain constant, if Export

increase by 1-unit, Real GDP will increase by 0.045unit.

Import: The Import value is -0.07, which is a negative value. Which suggest that if (C+I+G+X)

remain constant, if Import increase by 1-unit, Real GDP will decrease by -0.07 unit.

Standard Error: It suggests how accurate and reliable is the mean.

T-Stat and P- Value

The p-value is the likelihood that, if the null hypothesis is correct, each test will result in a t-value with

an absolute value at least as great as the one we actually observed in the sample data. The t-value is a

way to measure the difference between population means (Zach, 2021).

Consumption: α is 0.05 < 7.84 is P-Value (Accept null hypothesis).

Investment: α is 0.05 < 1.51 is P-Value (Accept null hypothesis).

Govt Expenditure: α is 0.05 < 0.13 is P-Value (Accept null hypothesis).

Export: α is 0.05 > 0.002 is P-Value (Reject null hypothesis).

Import: α is 0.05 > 0.000 is P-Value (Reject null hypothesis).

Lower and upper Limit of Coefficient

Consumption: 95% possibility the coefficient can go as high as 0.730 and 95% possibility it can go

as low as 0.474.

Page | 15
Investment: 95% possibility the coefficient can go as high as 0.161 and 95% possibility it can go as

low as 0.112.

Govt Expenditure: 95% possibility the coefficient can go as high as 0.040 and 95% possibility it can

go as low as -0.005.

Export: 95% possibility the coefficient can go as high as 0.073 and 95% possibility it can go as low

as 0.017.

Import: 95% possibility the coefficient can go as high as -0.039 and 95% possibility it can go as low

as 0.100.

Conclusion

From 1965 to 1971, GDP, consumption, investment, government expenditure, export, and imports

were almost low and flat lines in the graph we can see. After the liberation, all these components

started increasing slowly and now are upward-sloping. Bangladesh has completed 51 years of its

victory. Bureaucracy, politicians, business people, administrators, scientists, executives, everyone has

51 years of competence in diverse industries. Bangladesh has a steady capacity to obtain more

muscular GDP development. As a result, we demand speedier, more inclusive, and long-term growth

soon. Policies like ‘Vision 2021’ and ‘Digital Bangladesh’ will lead Bangladesh to achieve the target

of being a developed nation by 2041 (Kabir, Overview of Bangladesh economy).

Page | 16
 References

Bangladesh GDP 1960-2022. MacroTrends. (n.d.). Retrieved December 20, 2022, from

https://www.macrotrends.net/countries/BGD/bangladesh/gdp-gross-domestic-product

Independent, T. (n.d.). Evolution of bangladesh economy. Evolution of Bangladesh economy |

theindependentbd.com. Retrieved December 20, 2022, from

https://www.theindependentbd.com/printversion/details/240426

Kabir, M. M. M. (n.d.). Overview of bangladesh economy. Retrieved December 20, 2022, from

https://www.bdhcottawa.ca/economy-and-trade/overview-of-bangladesh-economy

Zach. (2021, August 30). The difference between T-values and p-values in statistics. Retrieved

December 24, 2022, from https://www.statology.org/t-value-vs-p-

value/#:~:text=For%20each%20test%2C%20the%20t,null%20hypothesis%20is%20actuall

y%20true.

Haque, S. T. (2012, June). Effect of Public and Private Investment on Economic Growth in

Bangladesh: An econometric Analysis*. Retrieved from Bangladesh National Portal:

https://mof.portal.gov.bd/sites/default/files/files/mof.portal.gov.bd/page/17643e1a_542c_4

7c8_a833_91a90d156ac7/chapter5.pdf

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