Bangladesh’s economy has witnessed GDP growth of more than 6%, despite drastic decline in private sector credit growth, along with relatively low infrastructure investment in the first half of the election year (2012- 2013).
However, stakeholders and economists said the country’s economy is passing through a transition period.
It will move from a sound macroeconomic situation to a dire economic scenario with a declining growth rate, high inflation and low investment, they said.
The country’s foreign exchange reserve crossed $15bn mark this fiscal year mainly due to higher inflow of remittances, and declining imports.
People’s lives have been hit hard by relatively high inflation due to shortage of investment. Employment generation and investors’ confidence is low, resulting in slow investment due to ongoing political turmoil, scams afflicting the banking sector, developments in the readymade garment (RMG) sector and frequent labour unrest, they noted.
The Padma bridge corruption allegation and recent Rana Plaza incident have hindered exports and ruined the image of Bangladesh abroad, they said.
Consumer price indices have hovered around 7% to above 8% during the outgoing fiscal, according to the Bangladesh Bureau of Statistics.
The local stock market has passed through a recession and, as a result, thousands of investors are sitting at home quietly after losing everything they had.
The stock market crash of this magnitude naturally shook the confidence of most investors. The government utterly failed to perk up the situation through policy measures and restore confidence of the investors.
The US-based think-tank Fast Market Research (FMR) said the country’s overseas trade is likely to be badly affected in this fiscal year as the ongoing political unrest is showing signs of intensification.
FMR is doubtful that the government of Bangladesh will be able to build the Padma Bridge with local resources after withdrawing its request for a $1.2bn loan for the project from the World Bank this fiscal year.
The Centre for Policy Dialogue said a drastic fall in private investment remains a key factor behind the
estimated 1% decline in GDP growth during the outgoing fiscal (2012-13).
The growth of private investment is estimated at 19% in the fiscal 2012-13 against 20% in the previous fiscal.
GDP growth estimated at 6.03% in 2012-13 fiscal year, failing to reach the budget target of 7.2%.
According to the Bangladesh Bank data, the growth in credit flow to the private sector kept falling in the recent months as political turmoil is badly affecting the country’s overall economy ahead of the next general elections.
The private sector credit growth came down to 12.72% in March last from 13.96% in February the previous month. The growth rate was 14.83% in January of the current calendar year.
Finance Minister AMA Muhith, however, in a pre-budget meeting said the country witnessed bumper production of Boro paddy, potato and maize in the year.
In addition, as the public sector investment has been boosted by 1.65%, which covers up the private sector investment, the GDP growth would not be less than 6.3%, he observed.
As per the Implementation Monitoring and Evaluation Division (IMED), implementation rate of Annual Development Programme is 54% in April, which is 4% higher than the corresponding period of the last fiscal year.
With this increase, the deficit in the private sector has met, and in some cases surpassed expectations. If more investment poured in the growth rate would go up further, the minister said.
Economic growth usually slides by 0.5-0.8 percentage points in the election year, but this time that will not happen, Muhith recently told the media.
The minister also hoped two main political parties would finally reach a compromise regarding the prevailing political hitch in the country.
Muhith said shutdowns by oppositions are causing much more damage to the country’s economy than the accidents at garment factories.
Dr Shamsul Alam, member of the planning commission told the Dhaka Tribune: “Bangladesh has achieved above 6% growth which is to some extent very good. India’s growth this year is only 5%. So compared to India and China’s growth rate our GDP is quite good.”
Economists said this type of growth scenario has not sufficiently created employment and investment in the country in the election year when political government maintains political compulsion.
Wealth distribution and inequalities widen due to lack of governance and political influences, they added.
The Hallmark and the Bismillah Group scandals have shaken the people’s trust in government-owned as well as private banks. The profit volume of the banking sector declined to a great extent. l
Besides, the country’s confrontational political situation, the Rana Plaza incident and problem with the Generalised System of Preference are now taking its toll on investment and business negotiations with foreign buyers, especially in the export-oriented sectors, industry sources said.
They said the continuous hartals (general strike) might lead investors and foreign buyers of Bangladesh-made products to shift their investments and orders to other countries like Myanmar, Cambodia and Vietnam.
President of Bangladesh Exporter Association and former president of BGMEA Abdus Salem Murshedy said the country’s export sector is maintaining a growth of above 9% in the outgoing fiscal year despite international challenges, political and garment sector unrest along with big and tragic incidents of Tazreen and Rana Plaza.
