Bangladesh has emerged as one of the fastest-growing economies in Asia, largely driven by its thriving ready-made garments (RMG) sector and a steady influx of remittances from its expatriate workforce. These sectors have propelled the country towards significant economic progress, lifting millions out of poverty and positioning it as a rising economic power in South Asia. However, rapid growth in these areas brings with it a potential risk known as "Dutch Disease," a phenomenon that, if not addressed, could undermine long-term development by damaging other crucial sectors of the economy. This article explores whether Bangladesh is susceptible to Dutch Disease and presents strategic pathways to avoid it, ensuring sustainable and balanced economic growth.

Understanding Dutch Disease: A Literary Insight

The term "Dutch Disease" first appeared in the 1970s following the economic challenges faced by the Netherlands after the discovery of large natural gas fields in the 1960s. Initially, this discovery seemed like a blessing; however, the inflow of foreign currency caused the Dutch guilder to appreciate sharply. As a result, other sectors, particularly manufacturing, became less competitive globally, leading to a decline in industrial output. 

The essence of Dutch Disease lies in an economic imbalance where one booming sector leads to currency appreciation, reduced competitiveness in other industries, and eventually economic overdependence on a single source of income. This concept, although initially tied to natural resource discoveries, has since been applied to economies reliant on other sectors such as remittances and industrial exports. The risk of such an economic imbalance is particularly relevant for Bangladesh, given its heavy reliance on a few key drivers of growth.

Bangladesh’s Economic Landscape: At Risk of Dutch Disease?

Bangladesh does not rely on the export of natural resources like oil or gas, yet its economy shows certain parallels to those vulnerable to Dutch Disease. The country's RMG sector accounts for around 80% of total export earnings, while remittances provide a significant source of foreign exchange. This has created a narrow base of economic growth, making Bangladesh vulnerable to external shocks. If demand for RMG products diminishes due to global market shifts or heightened competition from other countries, or if remittance flows are disrupted by geopolitical tensions, the economic consequences could be severe.