Bangladesh and Sri Lanka’s Macroeconomic Variables

Introduction

?This report compares the economies of Bangladesh and Sri Lanka, two South Asian nations. In contrast to Bangladesh, whose economy was affected by a decrease in terms of trade and is currently regulating its exchange rate; currently, there is an economic crisis in Sri Lanka with rising levels of poverty due to persistent fiscal and current account deficits, rising debt, and inadequate governance. ?In general, Sri Lanka's infrastructure is more advanced than Bangladesh's, with a larger road and rail network and greater rates of electrification. Sri Lanka exports considerable amounts of services like tourism and information technology, whereas Bangladesh heavily depends on the garment industry for its export earnings. Sri Lanka became a Republic in 1972 but until then it continued to be a Dominion of the British Empire whereas Bangladesh, which was once part of the Indian subcontinent, was liberated in 1971.With a population of 22.2 million, Sri Lanka has an area of 65,610 square kilometers, a 44% smaller area than Bangladesh, which has a population of 169.8 million a territory of 148,460 square kilometers. This means Sri Lanka has 71.81% lower population density of 327 people/km2 compared to that of Bangladesh, which is 1160 people/km2.

The trends of the economy of the two nations throughout the course of the last 20 years, from 2003 to 2022, will be discussed and summarized in this study. Although there are various ways to gauge a nation's economic performance, macroeconomic factors like GDP, GDP per capita, unemployment rate, and inflation rate have been considered in this case to compare the two economies. The aforementioned factors will be applied to compare the data disparities between the two countries and give an overview of each country. The data will be displayed in graphs, tables, and other charts to facilitate comprehension and allow us to provide vivid descriptions of each graph and justifications for trends in this report. Consequently, by the end of this report, we will be able to determine which nation has greater economic strength.

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GDP

The gross domestic product (GDP) is “the measure that we have named to the total market value of the final goods and services produced within a nation during a given year.? The GDP data form part of the National Income and Product Accounts, which is a statistical unit that allows policymakers to make decisions on whether the economy contracted or grew; if there was a severe recession or inflation threat It is the most complete measurement of a nation's overall production in goods and services, which is the grand total of the consumption (C), gross investment (I), government purchases (G), and net exports (X) produced during a given year.”? The GDP is used to a great extent for many things, but it's the total performance of our country's economy that matters most. It gives an overview of the economy as a whole. By providing an economic snapshot of a country, GDP helps us to estimate the size of an economy and its growth rate. This analysis will compare the GDP (constant 2015 US$) of Bangladesh and Sri Lanka in the past 20 years. The data is collected from an officially recognized source, the World Bank.

GDP of Bangladesh:

This graph shows the GDP of Bangladesh over 20 years in US dollar values. Here we can see a drastic change in the GDP in 2003, which shows the lowest value of GDP and in 2022, which shows the highest value of GDP. We can see that the GDP is gradually increasing over years and there is no downfall in the GDP. In 2003 the GDP was almost 100 billion US$ where in 2022 the GDP was more than 300 billion US$. We have experienced an increase of over 200 billion US$ in the past 20 years. In 2015 the GDP was almost 200 billion US$ and in 2016 this amount had crossed over 200 billion US$. From 2016 it took 6 years to increase more 100 billion US$ in 2022, when it crossed 300 billion US$. In the very beginning years, it took 12 years from 2004 to increase more 100 billion US$ in the GDP which actually happened in the year of 2016 with more than 200 billion US$ in GDP.

?GDP of Sri Lanka:

The graph shows the values of GDP of Sri Lanka over 20 years in dollar values. Here we can see that the lowest GDP value shows in the year of 2003, which is 25 billion US$ and this GDP journey ends in the graph at 88.5 billion US$ in the very last year of 2022. We can see the gradual increase in GDP till the year 2018 which is from 25 billion US$ to 97.4 billion US$. Then we have witnessed a downfall from the year 2019 to 2020. The GDP fell from 97.4 billion US$ to 92.7 billion US$, which is a fall of 4.7 billion US$. Again in 2021 the GDP increased about 3.3 billion US$, which was 96 billion US$. But the increase in GDP didn’t last long and it again fell by 7.5 billion US$ and the value of GDP became 88.5 billion US$ in 2022.

GDP of Bangladesh and Sri Lanka:

The blue bars in the graph represent the GDP of Bangladesh, while the red bars represent Sri Lanka’s. From the generic view we can see that the GDP of Bangladesh is much higher than Sri Lanka’s. Sri Lanka’s highest GDP was 97.4 billion US$ in 2018 whereas Bangladesh’s highest GDP was 306 billion US$ in 2022. And as for the lowest value, it was 25 billion US$ in 2003 for Sri Lanka and for Bangladesh it was 95.4 billion US$ in 2003. We can see from the above that Sri Lanka’s highest GDP was just 2 billion US$ more than Bangladesh’s lowest. Also, we can observe that Bangladesh shows a persistent growth in GDP which is increasing gradually whereas Sri Lanka’s GDP showed downfalls in the middle of these 20 years. Sri Lanka’s GDP here could not even cross 100 billion US$ but in an interesting way the GDP of Bangladesh crossed only in 2 years which is in 2004. Very lastly in 2022 we observed Bangladesh had a GDP of 306 billion US$ whereas Sri Lanka had a GDP of 88.5 billion US$, shows a difference in the GDP value of 217.5 billion US$.

??UNEMPLOYMENT RATE

?Unemployment is a major problem in a country. When a country faces a high rate of unemployment it affects the standard of living. A person does not have a paid job, but the person wants a job; this situation is called Unemployment. Unemployment is measured by the unemployment Rate. Unemployment becomes a problem when a country’s unemployment rate increases. When a country’s unemployment rate is rising gradually its standard of living is falling. It is very difficult to measure unemployment. Every country always faces a natural rate of unemployment.?

This analysis will compare the unemployment rate (%) of Bangladesh and Sri Lanka in the past 20 years. The data used in this comparison was collected from the World Bank.

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Unemployment Rate of Bangladesh:

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The unemployment rate in Bangladesh has shown steady fluctuations over the years. There are almost the same values from the year 2003 to 2005, which are near 4.30%. There is a sudden decrease in value in 2006 which is 3.59%. From 2007 to 2009 there is a steady increase from 4.092% to 5%. In 2010 we can see a sudden huge decrease in the unemployment rate which is 3.38%. From the graph, we can see that the lowest unemployment rate was recorded in 2010. There is a gradual upward movement from 2010 to 2020. In 10-year the unemployment rate increased from 3.38% to 5.209%. The highest unemployment rate happened in 2020 which is 5.209%. From 2021 to 2022 we can see the employment rate is decreasing from the peak value. In 2022 it became 4.609%.in 2020 during Covid 19 Bangladesh face the highest unemployment rate over 20 years.

Unemployment Rate of Sri Lanka:

For Sri Lanka’s rate of unemployment, the graph shows that there is a downward movement from 2004 to 2012. In 2003 the rate was 8.22% and from 2004 the value decreased and in 2012 it became 3.88%. After 2014 the graph shows a notable rising trend for the next 8 years. In 2014 the value was 4.19% and after 8 years it become 6.075% in 2022. The highest rate of value recorded in 2004 was 8.38%. Over 20 years the lowest value was recorded at 3.88% in 2012. Overall, there is a noticeable decrease in the unemployment rate in Sri Lanka. One of the reasons for unemployment in Sri Lanka is that people are more interested in public sectors job that’s why they waited for a long time for desired jobs. After Covid, the unemployment rate is increasing slightly in Sri Lanka.

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Unemployment Rate of Bangladesh and Sri Lanka:? ?

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From 2011 to 2021 the overall unemployment rate for Bangladesh and Sri Lanka is moderately the same. But in 2003 the unemployment rate in Srilanka was double that of Bangladesh. After that, we can see that the unemployment rate of Sri Lanka started to decrease. the 20 years of data on the unemployment rate, the rate fluctuates between 3% to 6%? in Bangladesh whereas Srilanka’s unemployment rate declined from 8.38%. So, as Sri Lanka’s unemployment rate is decreasing so Srilanka is doing better in this case than Bangladesh.

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INFLATION RATE

?Inflation is a situation in which the price level of the economy as a whole rises. The rate at which price levels?change relative to a prior interval of time is known as the inflation rate, which is usually calculated annually. Inflation is more about value of money than value of goods. It rises with increase in supply of money in the economy. With the expansion of the economy, the value of money decreases because a given amount of money is spent to purchase fewer goods and services than previously. The rate of inflation can be influenced by a number of factors (Glossary: Inflation - Statistics Explained, 2021). Increased production costs or increased demand for goods and services cause inflation. Inflation is caused by a growing economy, expanding money supply, government regulations, and changing exchange rates. It has a significant impact on our living standard and our cost of living.

This analysis will compare the Inflation, consumer prices (annual %) of Bangladesh and Sri Lanka in the past 20 years. The data is collected from an officially recognized source, the World Bank.

Inflation Rate of Bangladesh:

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????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????The values show steady fluctuations over the years and a general trend of modest variability with ???no extreme spikes or dips in the graph. There is a gradual increase in values from 5.668707734 % in 2003 to 11.39516516% 2011, suggesting a trend upward movement during this period. The lowest value in the above graph is 5.423472362%, which occurs in the year 2009; whereas the highest inflation rate over the 20 years is recorded in 2011 attributed to both supply and demand factors; surging global commodity prices, particularly food and oil, drove costs higher. Non-food inflation, mainly in non-energy items, rose due to a widening gap between domestic demand and production. Following that, there seems to be a period of relatively stable or consistent values until 2021 except for a slight decline during 2013-2016 from 7.530406409 % to 5.513525727 %. The graph exhibits a slight increase from 2021 to 2022 reaching 7.696954372%.

Inflation Rate of Sri Lanka:

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There seems to be some variation in the values from year to year, with a few years exhibiting significant changes compared to their preceding years. The graph reflects fluctuations in the values. For example, there is a relatively steady increase from 6.314637871% in 2003 to 22.56449553% in 2008, followed by a sharp drop in 2009 to 3.464963221%, and then another increase in 2010 to 6.217648893%. Following that, the inflation rate remains almost constant except for 2014-2016 and 2018-2019 reaching 3.528393582 %. In 2022, the graph appears to be at its peak with a value of 49.72110211%, said to be caused by reduced external revenue from the tourism sector during COVID-19 pandemic, however, World Bank states it is a combined effect of past economic policies, a weak monetary policies, poor investment opportunities, and effective exchange rate marking its highest inflation rate in two decades; after 22.56449553% in 2008 caused by tsunami-related reconstruction and rising food and fuel prices in line with global developments. The lowest is 2.135037737% which occurred in 2018 causing a decline of 5.57% in inflation rate from 2017.

? Inflation Rate of Bangladesh and Sri Lanka:

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The purple bars (Bangladesh) appear to represent a set of values that generally start lower in earlier years and show some fluctuations but without any clear trend. The maroon bars (Sri Lanka) represent a set of values that generally start higher in earlier years and exhibit a more noticeable variation exhibiting larger fluctuations, with a significant spike in the year 2022. Over the 20 years, Bangladesh has a mean (average) inflation rate of approximately 6.671%; whereas Sri Lanka has 9.171%. Bangladesh observed its peak inflation rate of 11.39516516% in 2011and Sri Lanka in 2022 of 49.72110211%, a significant difference of 38.33%. Sri Lanka shows greater variability with a wide range consistently holding higher values compared to Bangladesh throughout the years.

Analysis

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Over the past two decades, an analysis of the overall economies of Bangladesh and Sri Lanka reveals distinct patterns in terms of GDP growth, unemployment rates, and inflation rates. Bangladesh’s steady GDP growth has likely contributed to improved employment opportunities in some years, hence reduced unemployment rates. Additionally, while the expansion of economic activity could potentially lead to increased demand for goods and services, which, if not met by a corresponding increase in supply, might contribute to inflationary pressures; Bangladesh has managed to maintain a relatively controlled inflation rate, indicating effective economic management. A lower unemployment rate may lead to higher wage demands from workers, and businesses may raise pricing to reflect these increasing labor costs for customers, contributing to inflation. However, the moderate unemployment rate generally stayed between 3% and 5%. As for Sri Lanka, a declining GDP growth rate often coincided with higher unemployment rates, suggesting that economic contractions led to reduced job opportunities. Conversely, periods of GDP growth were associated with lower unemployment rates indicating other factors influencing the labor market. In initial years, higher GDP growth was accompanied by relatively elevated inflation rates, indicating potential supply-demand imbalances, whereas later lower GDP growth were associated with lower inflation, suggesting that weaker economic conditions had a dampening effect on price levels. While periods of higher unemployment rates might be expected to exert downward pressure on inflation, this relationship is not consistently observed. This suggests that other factors, such as external shocks, government policies, and global economic conditions, had a crucial part in determining inflation dynamics.

Conclusion

In terms of overall economic performance over the two decades, Bangladesh demonstrates a more consistent and robust growth pattern in its GDP, lower and steadier unemployment rates, and relatively controlled inflation. In contrast, Sri Lanka's economy, while showing signs of progress, has had periods of growth and decline in its GDP and faced greater economic volatility and challenges, particularly in managing inflation and maintaining steady growth. This suggests a need for more comprehensive and targeted economic reforms. Though both nations have opportunities for improvement, according to this report we can conclude that Bangladesh's overall economy is in a better position than that of Sri Lanka.

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