Bangladesh is grappling with a stark decline in national savings, exacerbated by the sharp rise in inflation.
Over a span of three years, the total national savings rate, as a percentage of the country’s GDP, has fallen by almost 2.5%, highlighting the growing difficulty for ordinary citizens to save in the face of escalating living costs.
According to the latest data from the Bangladesh Bureau of Statistics (BBS), the national savings rate for the 2023-24 fiscal year stands at 28.42% of GDP, down from 30.79% in 2020-21.
This marks a 2.37% drop over the three-year period. The 2021-22 fiscal year saw a slight decrease to 29.35%, while the following year registered a modest recovery to 29.95%.
Similarly, domestic savings have also taken a hit. In 2023-24, the proportion of GDP saved domestically was 23.96%, compared to 25.34% in 2020-21.
The rate had dipped further to 25.22% in 2021-22 before slightly rising to 25.76% in the subsequent year.
Investment, a key driver of economic growth, has also shown signs of stagnation.
The total investment for the 2023-24 fiscal year was 30.70% of GDP, a decrease from 31.02% in 2020-21.
Compared to the 30.95% recorded in 2022-23, this suggests a broader trend of limited growth in investments.
The statistics indicate a disturbing pattern: as savings and investments shrink, the ability to create jobs and maintain real wage growth has faltered.
Despite efforts to bolster savings through schemes like savings certificates, which were once seen as a reliable financial refuge, even these have seen a decline, with more money being withdrawn than invested.
In response to the pressures of high inflation, the government has found itself in a tight spot.
Despite increasing interest rates, the sale of savings certificates has remained sluggish, further signifying the challenges in generating fresh savings.
The current economic environment, shaped by the aftermath of the COVID-19 pandemic and the ongoing Russia-Ukraine war, has placed the populace under intense financial strain.
Rising fuel prices have kept inflation high, and incomes have not kept pace, with real wages failing to rise in line with living costs.
Economists have warned that these trends could have serious implications for both the national economy and government finances.
According to economist ABM Mirza Azizul Islam, while internal savings once outpaced investment, the reverse is now true, as the impact of inflation continues to dampen household savings.
He further stressed that the decline in savings could lead to a shortage of funds for investment, with foreign capital becoming an increasingly vital component of the economy.
Similarly, economist Dr Zahid Hussain pointed out that lower income growth and higher inflation are crucial factors behind the diminished savings rate.
With inflation outpacing income growth, people are being forced to dip into their savings just to cover basic living expenses, a situation that could hamper future economic growth.
As the country faces a challenging fiscal year, the government has been advised to focus on reducing inflation to alleviate pressure on household finances and prevent further erosion of savings.
The failure to meet savings targets could also lead to a widening budget deficit, further complicating the country’s fiscal outlook.
In conclusion, the steady decline in national savings and investment calls for urgent economic reforms.
Without a robust strategy to counteract inflation and stimulate savings, Bangladesh may face serious long-term consequences in terms of growth, employment, and fiscal stability.
