Despite macroeconomic challenges, GDP growth in Bangladesh is projected to be in the 6.5-7% range during FY18-20, the World Bank has said.
Bangladesh is continuing a strong development trajectory, according to a new World Bank report, “The Bangladesh Development Update April 2018,” published on Monday.
In his opening remarks during the release of the report, Qimiao Fan, World Bank country director for Bangladesh, Bhutan, and Nepal, said despite having floods twice impacting agriculture, the country had maintained robust growth in the current fiscal year.
He noted that Bangladesh’s sustained development progress is reflected in the recent UN determination that the country is eligible to graduate from Least Developed Country status.
“While actual graduation is a few years away, this is an important milestone,” he said.
The report noted, however, that the pace of poverty reduction has slowed down.
The national poverty rate fell in both rural and urban areas, but the speed of reduction was much slower in the latter, largely because of slower rates of poverty reduction in Dhaka and increasing poverty in Chittagong.
With the increase in urban population, now more people (3.3 million) live in extreme poverty than in 2010 (3 million). With inequality in agricultural growth, more than half of the population is vulnerable to falling back into extreme poverty. In addition, the influx of over 688,000 Rohingyas since August 2017 has put a strain on resources for host communities in Teknaf, Cox’s Bazaar.
Bangladesh exports have rebounded – primarily led by the Ready-Made Garments (RMG) sector – with a 6.33% growth in FY18, compared with 4% in the previous year. A 17% growth in remittances, with more Bangladeshis going to work abroad, combined with effective action against illegal money transfers, may have contributed to the recovery, added the report.
The key growth drivers are expected to be exports driving manufacturing growth and services, driven primarily by domestic consumption. Despite being affected by recurring floods in 2017, the agriculture sector has rebounded. However, private investment, which stagnated in recent years, is expected to pick up with growing confidence on infrastructure development prospects, strong domestic demand, and stronger global markets.
With around two million young people entering the job market every year, Bangladesh must achieve export-led growth by breaking into new markets with new products to create more and better employment opportunities, the report said.
The fiscal deficit has been contained for the wrong reasons, namely the slow implementation of much needed capital spending. Tax revenue as a share of GDP remains among the lowest in the world. As the economy moves towards generating the wealth of a middle-income country, it also needs to generate revenue for the public services and investment of a middle-income country.
The report praised the National Board of Revenue for launching the Medium-Term Revenue Strategy development process last Thursday, which is a positive step in this regard.