For years, Bangladesh has been called the “Asian Tiger” because of its rapid economic growth and development. But recently, a report by the City Bank Capital Resources stated Bangladesh’s GDP is significantly overstated. According to the report, the actual size of Bangladesh's GDP for the fiscal 2023-24 has been estimated at around $300 billion, not $459 billion. Using a comparative “Electricity Consumption v Economic Output” model, City Bank Capital has reached this conclusion.
In this model, Bangladesh’s economic output per megawatt (MW) of electricity consumption was calculated, which is like comparing how much a country produces for every unit of electricity it uses. This method helps to see if the reported GDP aligns with energy usage, as more production with less electricity can indicate either great efficiency or overestimated figures. Furthermore, City Bank Capital found no reason to give Bangladesh the benefit of the doubt, as neither its service sector nor high-value production contributes exceptionally to its GDP.
The numbers reveal a striking anomaly. Bangladesh consumed only 96 million MW of electricity in the fiscal year ending June 2024. Despite this relatively low consumption, the official GDP figure implies an economic output per MW of $4,781. On the contrary, China has an economic output per MW of $2,354, Pakistan has an economic output per MW of $2,968, and India has an economic output per MW of $3,079.
This huge disparity raised questions about the accuracy of Bangladesh’s GDP calculation. The report stated that Bangladesh’s GDP needs to be recalibrated, questioning how Bangladesh's economy could have an outlier edge for an astonishing 50-60% higher economic output than India, Pakistan, or China per unit of electricity consumption.
A lower GDP could reshape Bangladesh’s economic narrative in multiple ways. The total debt-to-GDP ratio rises from 36.43% to 55%. This higher ratio could make lenders cautious, as they might see Bangladesh as a riskier borrower. As a result, lenders may demand higher interest rates for loans, making it more expensive for Bangladesh to take on new debt. These higher interest payments would put extra pressure on Bangladesh to maintain its foreign currency reserves.
The recalibration will increase Bangladesh’s external debt as a percentage of GDP from 15% to 28%. External debt refers to the money a country owes to foreign creditors, including governments, financial institutions, and private investors.
The report further stated that the actual export figure for FY24 will be $44.5 billion – $10 billion less than the previous estimation – and could soar to around $50 billion this fiscal year, which indeed happened. However, overstating export figures can be misleading, as they are a critical component of the current account. The current account serves as a financial report card for a country’s trade and economic interactions, tracking the balance of exports and imports, income from foreign investments, and payments to other countries. Incorrect export data can affect this important economic measure, leading to wrong decisions in policy and finance.