Analysis of Supply Dynamics of banking industry of Bangladesh

Topics: Central bank, Monetary policy, Fractional-reserve banking Pages: 23 (6815 words) Published: January 22, 2014
2. Analysis of Supply Dynamics Issues
When we talk about supply in terms of the banking sector, we talk about supply of funds that the bank can loan. This supply of loanable funds come mainly from the customers themselves in the form of deposits. The demand section of this report discusses in-depth about the deposits from the market. This section is used to address the macro-economic aspects of the supply of funds including the money supply of the country, major contributors in the supply dynamics, the constraints of monetary policy etc. a. Domestic production and imports

The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output. The economy of Bangladesh is a rapidly developing market-based economy.  Its per capita income in 2013 was estimated to be US$847.34 (adjusted by GDP Per Capita). According to the International Monetary Fund, Bangladesh ranked as the 44th largest economyin the world in 2012 in PPP terms and 57th largest in nominal terms, among the Next Eleven (N-11) of Goldman Sachs and D-8economies, with a gross domestic product of US$306 billion in PPP terms and US$115.6 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leather goods, ceramics, ready-made goods. Bangladesh recorded a trade deficit of 643.50 USD Million in August of 2013. Balance of Trade in Bangladesh is reported by the Bangladesh Bank. From 1995 until 2013, Bangladesh Balance of Trade averaged -1105.0 USD Million reaching an all-time high of -32.3 USD Million in July of 2013 and a record low of -5370.6 USD Million in June of 2008. Bangladesh exports mainly ready-made garments including knit wear and hosiery (75% of exports revenue). Others include: Shrimps, jute goods (including Carpet), leather goods and tea. Bangladesh main exports partners are United States (23% of total), Germany, United Kingdom, France, Japan and India. Bangladesh imports mostly petroleum product and oil, machinery and parts, soybean and palm oil, raw cotton, iron and steel and wheat. Bangladesh main imports partners are China (17% of total), India, Indonesia, Singapore and Japan.

Domestic credit provided by banking sector (% of GDP) in Bangladesh The Domestic credit provided by banking sector (% of GDP) in Bangladesh was last reported at 71.27 in 2011, according to a World Bank report published in 2012. Domestic credit provided by the banking sector includes all credit to various sectors on a gross basis, with the exception of credit to the central government, which is net. The banking sector includes monetary authorities and deposit money banks, as well as other banking institutions where data are available (including institutions that do not accept transferable deposits but do incur such liabilities as time and savings deposits). Examples of other banking institutions are savings and mortgage loan institutions and building and loan associations.

b. Growth/Trend
In Bangladesh, the gross domestic product (GDP) in Fiscal Year 2013 (ended 30 June 2013) grew by 6.0%, higher than projected in the Asian Development Outlook (ADO) 2013 in April. Export growth accelerated briskly, but imports were flat, such that net exports markedly contributed to growth. Agriculture growth slowed to 2.2% because weather was unfavorable and rice prices fell. Industry grew by 9.0%, with strong expansion in construction and small-scale manufacturing. Services growth slowed slightly to 5.7%, reflecting stagnant imports and politically inspired strikes that disrupted trade.

Selected Economic Indicators(%) – Bangladesh
2013
2014

ADO 2013
Update
ADO 2013
Update
GDP Growth
5.7
6.0
6.0
5.8
Inflation
7.8
7.7
7.0
7.5
Current Account Balance (share of...
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