Bangladesh is situated on a river delta and has few natural resources beyond its very rich soil. With the highest population density of any country except city-states like Singapore, its cultivated land is overcrowded, undercapitalized, and dominated by subsistence farmers working uneconomically small plots. Over 60% of the country's total land area is cultivated and about 63% of the economically active population derive their livelihood from farming. Growth rates have not been high enough to eliminate a substantial incidence of poverty, estimated at over a third of the population in 2000. Underweight children under five years old as a percent of the total dropped only 10%, from 66% to 56% between the period 1990–92 and 1998–99. Nevertheless, signs of modest improvement in the economy have been evident during the past decade, despite periodic weather disasters, to which Bangladesh remains vulnerable, and international market ions. Agriculture still accounts for almost 30% of the GDP, although this proportion has dropped significantly from 50% in 1979/80, as services have grown from 34.4% to 52%. Industry's share has increased only from 15.9% to 18%, according to CIA estimates.
The prospect of return to elected government in 1990 helped produce an upsurge in growth in 1989/90 of 6.6%, but in 1990/91 the combined effects of the Gulf War, domestic political disturbances, and a devastating cyclone resulted in a drop in GDP growth rate 3.4%. Pursuit of further stabilization and structural adjustment measures by the government in 1991 allowed Bangladesh to weather these crises, strengthen its revenue base, bring inflation to a record low of 1.4% in 1993, and maintain a good balance of payments position. However, political instability and a lack of continued economic reforms pushed inflation to5.2% in 1995. Sluggish development investments, limited growth in value-added by manufacturing, and bureaucratic inefficiency in aid disbursement and project realization persisted. Still, with the election of the Awami League government calming the political waters, growth rates and export and tax revenues rebounded in 1996. GDP grew 4.7% in 1996, while inflation eased to 5.04%.
Though the indicators were promising as of 1997, the government's delay in instituting needed reforms threatened to slow economic advances. Inflation rose to 7%, while GDP had slowed to 4%. The Awami League promoted the exploration, distribution and manufacture of oil and gas in Bangladesh in the late 1990s, but stalled on the details of contracts. As 2002 ended, exploration continued to be delayed by political squabbles over participation by foreign companies. The economy grew strongly during 1998, real growth reaching 5.4% as flooding, instead of devastating the economy, brought in some much needed foreign aid. Severe flooding also occurred in 1999, and growth slowed to 4.9%, and 3.4% in 2000. The global economic slowdown, and the after-effects of the 11 September 2001 terrorist attacks on the United States and the War on Terror in 2001, combined with continuing internal political turmoil are projected to have brought economic growth almost to a halt in Bangladesh, with an estimated growth rate of 1.6%.