Relevance of middle-income trap (MIT) to the vision-based development in Bangladesh

Abstract

Purpose – This study aims to investigate whether Bangladesh would avoid the middle-income trap (MIT) in its transition to a high-income country (HIC) according to its “Vision 2041”. Design/methodology/approach – Using both actual and forecasted secondary data, three MIT models of different approaches were used to evaluate the government’s vision-based projections. Moreover, crucial indicators of deindustrialization and institutional strength were linked to the investigation of potential transitions. Findings – According to the absolute definition and international forecasts, the Bangladesh economy might not fall into an MIT at its lower-middle-income level within the intended period due to being shorter than the defined limit. However, its real GDP per capita relative to the USA would remain far below the defined threshold limit of an upper-middle-income country (UMC) in 2041. Meanwhile, Bangladesh has reached the third of the five gradual phases and is awaiting a new transition in 2029. However, its vision-based plan would face challenges such as skills gaps, institutional reforms and successive global crises. Practical implications – Bangladesh might be trapped in MIT at the UMC level in the 2030s, with no path to renovate after the demographic dividend ends in 2047. In this regard, the government must demonstrate a strong political will to ensure the effectiveness of its policies and the viability of its institutions. Originality/value – This study not only compared projections to forecasts using different MIT models but also connected transition phases to industrial policies and institutional strengths.

Keywords

• Economic growth
• Middle-income trap (MIT)
• Development policy
• Vision 2041 of Bangladesh
• Demographic dividend
• Premature deindustrialization