Bangladesh is likely to see lower GDP growth in the fiscal year 2014 due to reduced export growth and investment, even before possible political unrest ahead of the national election, says the Asian Development Bank (ADB).
“GDP [gross domestic product] is expected to grow by 5.8%. We expect export growth to be lower than assumed earlier. Consumer and investment demand will also be weaker,” ADB Country Director Teresa Kho told a press conference at its office in Dhaka on Wednesday.
She also said political tensions in the lead-up to the elections are building up, which she said was “not helpful for maintaining steady economic activity”. The Asian Development Outlook projection of GDP growth was 6% in 2013 while the government set GDP growth at 7.2% for the fiscal year 2014.
“To grow more rapidly, Bangladesh needs to attach higher priority to enhancing its business climate, improve infrastructure and trade logistics and address shortages. Bangladesh also needs to shore up investment on an accelerated basis and diversify its sources of growth,” the ADB Country Director said.
The press conference was arranged to launch the Asian Development Outlook Update (ADOU) 2013, the flagship economic publication of the ADB.
Principal Country Economist of the ADB Mohammad Zahid Hossain made a presentation on the economic update. Senior External Relations Officer Gobinda Bar was also present.
Zahid Hossain said, “Political stability is absolutely essential. We hope that the political stability will prevail so that the economy can function. Bangladesh has tremendous opportunities to get middle-income country status before the timeline.”
“[But] Political uncertainty prompts consumers and investors to adopt a more cautious approach to spending, and frequent strikes disrupt economic activity,” he added.
Zahid Hossain also said political agitation could escalate and seriously disrupt economic activity. “Exports and consumer investment demand will not be as buoyant as expected earlier.”
Asked about major challenges for the Bangladesh economy, Zahid Hossain said investment in infrastructure and skill development and regulatory reform needed to be addressed.
“Investment needs to grow. Unless investment takes place, attaining higher growth will appear difficult,” he said.
Asked about ADB implementation, Zahid Hossain said since the election is approaching, the rate of ADP (annual development programme) implementation might increase. “But if there’s political unrest, the ADP implementation rate might get slower.”
He added that it is not true that the ADP always forecast lower growth. “That’s (ADB projection) not a big drop (from the previous year).”
He said industrial growth will slow to 8.2% in FY2014 compared to 9% in FY2013, reflecting weaker domestic demand and slower export growth. “Average inflation in FY2014 is projected to be 7.5%.”
Meanwhile, revenue collection and foreign financing could fall short and political pressures might scuttle planned increases in fuel and electricity prices, he added.
Zahid Hossain also said fiscal management could be undermined, including bank borrowing that would break monetary discipline.
Asked about measures taken by the leading global brands and other stakeholders to improve safety in the readymade garment sector, Zahid Hossain said: “These are positive initiatives. We hope these initiatives will bring benefit for the sector and stakeholders.”
Meanwhile, responding to a question on GSP suspension, ADB Country Director Teresa Kho said, “This is really a matter between the US and government of Bangladesh. This is not a question for us to respond at this time.