In 2005, Bangladesh’s real gross domestic product (GDP) grew at 5.4 percent, down somewhat from the 2004 growth rate of 6.3 percent. Economic forecasts are at 5.8 percent for 2006. Economic performance has been steady since 1990, with annual GDP growth averaging 5 percent. However, Bangladesh remains one of the world’s poorest and most densely populated countries, and faces a number of obstacles to further growth and development.

Despite recent growth, Bangladesh faces numerous challenges. According to the International Monetary Fund (IMF), the country is hampered by weak institutions and inadequate infrastructure. Bangladesh remains dependent on foreign aid and worker remittances for a large percent of its economic activity. In 2004, the government of Bangladesh estimated that remittances from expatriates totaled $3.3 billion, or 6 percent of nominal GDP. The country also remains vulnerable to natural disasters such as cyclones, floods, and droughts. This is especially true in the agriculture sector, which employs about two-thirds of the labor force and accounts for 22 percent of GDP.

Bangladesh is a member of the South Asian Association for Regional Cooperation (SAARC), along with Bhutan, India , Maldives, Nepal, Pakistan and Sri Lanka. SAARC aims to promote regional economic cooperation as well as economic and social development in South Asia. In 2004, the seven SAARC members agreed to create a South Asian Free Trade Area (SAFTA), which came into force on 1 January 2006. SAFTA aims to reduce tariffs and other trade barriers between the seven member countries.