GDP growth narrows to 5.24% in FY2019-20, lowest in 12 years
As the country’s economic activities suffered badly in the final quarter of the last fiscal year due mainly to the corona-driven economic shutdown, GDP grew by only 5.24% in the 2019-20 fiscal year.
The economic expansion is down by 2.91 percentage points on the previous year, thanks to the rampaging virus and its protracted consequences on both domestic consumption and overseas export markets.
The slower growth in gross domestic product(GDP) occurred in the economy 12 years after fiscal 2008-2009, when growth contracted to 5.05%.
However, the per capita income of Bangladesh rose to $2,064 in FY20, up from $1,909 registered in 2018-19.
The size of the GDP at constant price stood at Tk27,963,782 million (Tk27,963,78.2 crore) in the last fiscal year, according to Bangladesh Bureau of Statistics (BBS) provisional data released on Monday.
As per BBS data, GDP growth rate at constant prices in the industry sector increased by only 6.48% in FY20, which was 12.67% in FY19.
On the other hand, investment to GDP inched to 31.75% against 31.57% in FY19.
Of the total investment to GDP, private investment ratio to GDP rose to 23.63% while the public investment ratio to GDP at 8.12%.
The GDP growth rate in the service sector rose by 5.32% which was 6.78% in FY19.
The GDP growth rate in agriculture was 3.11% in FY20 against 3.92% a year earlier.
Reasons behind the contraction
The government as well as economists have blamed the ongoing Covid-19 pandemic for the contraction in GDP as it had hit economic activities hard in the last quarter.
“We had an apprehension about the slower GDP growth as the economy was hit badly and performed poorly in the pandemic in the last four months of the previous fiscal year. Those months were crucial to the economy. But growth is better than expectations and projections of major research organizations,” Planning Minister MA Mannan told Dhaka Tribune.
There might have been minor reasons for the slower growth, but the covid pandemic had accelerated the fall which had been the prime reason, added Mannan.
Economists also echoed the government’s version on the slower GDP growth perspectives.
“The Covid-19 pandemic has hit the country’s different economic activities. It has also adversely impacted the services sector as well as non-crops production in the agriculture sector,” Professor Mostafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said.
A 5.24% GDP growth in FY20 had been the reflection of these impacts, said the economist.
How to revive GDP pace
As investment is key to GDP growth, the government should focus on boosting private investment and improving the business climate to attract investment from home and abroad.
“Public sector investment to GDP was better, which contributed largely to the 5.24% GDP growth in FY20. For recovery in the current year, we have to increase private sector investment to the tune of an additional amount of around Tk480,000 crore,” said Mostafizur Rahman.
It would be a great challenge to bring in the required investment, he said, adding that the government must utilize the stimulus packages effectively.
He urged the government to complete the Special Economic Zones (SEZs) and improve ease of doing business ranking by removing barriers to business.
On the other hand, it was very crucial to attract Foreign Direct Investment (FDI) to increase investment, he suggested.
Speaking on the rise of per capita income, Rahman said despite the increase in per capita income there still remained income inequality in society and indeed it had been intensified after the outbreak of the Covid-19 pandemic.
He suggested creating more decent jobs and gainful employment as well as launching a better safety net programme to reduce inequality.
However, the economist expressed his doubts over GDP growth on the ground that before the onslaught of the virus, the economic situation had not been that sound as to support a reported expansion.
“ There was apprehension about the attainment of the GDP target as the major economic indicators, including exports, private credit growth and manufacturing were in negative trajectories from the beginning of the last fiscal year. Only agriculture and remittances were in good shape,” he added.
However, the government is hopeful of recovery as the country’s agriculture sector has been performing well, while domestic investment will be vibrant with the support already offered to combat the Covid-induced economic fallout.
“We have crafted the Annual Development Programme to attain an 8.2% GDP growth for the current fiscal year. But it may not be possible as the economy is going through a lot of adversities. But we are trying heart and soul to recover from the economic fallout caused by the pandemic and attain the projected economic growth,” said Mannan.
Overall investment might not maintain the previous trend but domestic investment, especially from small and medium entrepreneurs, would be better as the government had offered a huge amount of funds for these sectors, stated the minister.
He noted that the economic driver of the country's agriculture sector was in good shape despite the pandemic.