Published in New Age on Thursday, 4 June 2015.
State of Economy FY2014-2015
Weak pvt investment leads dull macroeconomic indicators
The government announces the national budget for the fiscal year 2015-2016 today against the backdrop of a dull macroeconomic performance due to stagnation in the private investment, year-long political uncertainty and intense political unrest in more than three months of the second half of the outgoing fiscal year.
Economists and business leaders said that the economy swung between hope and despair in the FY 2014-2015 mainly because of continued hindrances including lack of businesses’ confidence in investment, shortage in energy, absence of visible progress in infrastructure development and good governance as well as political unrest and uncertainty.
According to the latest data, the country’s GDP growth did not grow at the expected level, private sector investment and job creation stagnated, revenue collection fell short of the target, ADP implementation remained slow and export earnings and inflow of foreign assistance grew insignificantly in the FY 2014-2015.
The National Board of Revenue set to fail to achieve even its downsized target of Tk 1,35,028 crore. The original target was Tk 1,49,720 crore.
According to the Implementation Monitoring and Evaluation Division of the planning ministry, the ADP implementation status remained dismally low as only 55 per cent of the revised ADP was implemented in the first 10 months of the fiscal year.
The country, however, experienced some macroeconomic advantages including lower inflation, declining interest rate, stable exchange rate, positive balance of payment, augmented foreign exchange reserve and better remittance inflows in the FY15.
Economists and business leaders termed the year challenging and dull in all aspects though many macroeconomic indicators were stable.
Transforming the macroeconomic stability and apparent political calmness into opportunities to uplift the economy towards higher economic growth will be the major challenge in the upcoming fiscal year, they said.
The second half of the fiscal year saw a severe disruption in production, transportation and service delivery due to political vandalism, they said.
According to the Bangladesh Bureau of Statistics, the economy will grow by 6.51 per cent, 0.79 percentage points lower than the target of 7.3 per cent set by the government for the FY 15.
The overall investment, according to a provisional BBS estimate, stood at 28.32 per cent in the outgoing fiscal year with public investment 6.22 per cent and private investment 22.1 per cent.
Finance ministry officials said that a series of measure was likely to be announced by finance minister AMA Muhith with the aim of lifting up the private investment which became stagnated after 2012.
The Centre for Policy Dialogue has identified some fault lines including unachieved revenue target, low flow of foreign assistance, sluggish exports to the US market and failure in ensuring incentive price for the farmers.
Acceleration in private investment remained illusive, it said adding that efforts to bridge the infrastructure gap did not see much visible success.
Export earnings grew by only 2.63 per cent in July-April of the fiscal year compared with that of the same period of the previous fiscal year.
The local think-tank, however, said the economy was stable with a number of macroeconomic advantages including lower inflation, declining interest rate, stable exchange rate, manageable fiscal deficit, positive balance of payment, augmented foreign exchange reserve and low level of global commodity prices.
According to the Bangladesh Bank data, remittance inflow remained better and stood at $13.87 billion in the July-May of the fiscal year.
The country’s overall point-to-point inflation stood to 6.32 per cent in April against the target of 6.5 per cent for the year.
‘The challenge for Bangladesh economy is to translate the prevailing macroeconomic stability into accelerated growth through higher pace of investment,’ CPD executive director Mustafizur Rahman told New Age on Wednesday.
For this, improvement of infrastructure, institutional reforms and raising quality of economic management are necessary, he said.
He said that apart from political unrest and uncertainty, the major challenges were lack of pace in infrastructure development, domestic resource mobilisation, timely and economically implementation of development projects, ensuring quality of government expenditure and absence of efforts to institutional and policy reforms.
Apparently, there is no political instability right now but uncertainty and apprehension exist in the mind of business people in taking decision for further investment, he said.
Inclusive political environment is necessary to remove such uncertainty and apprehension to accelerate the pace of investment, he added.
Policy Research Initiative executive director Ahsan H Mansur said that generally economic performance was not so bad under the circumstances of political unrest and uncertainty.
The impact of political unrest was not as harsh as it was apprehended, he said adding that the damage was limited and economy would have grown better if there was no unrest.
‘There was macroeconomic stability, GDP growth remained satisfactory and other indicators also remained stable and healthy while domestic revenue mobilisation and ADP implementation remained challenging as usual,’ he said.
Former Bangladesh Bank governor Saleh Uddin Ahmed said that economic performance was ordinary as the government failed to achieve many of its targets including GDP growth, revenue collection, ADP implementation and attracting private investment.
Improving infrastructure, providing power and gas to industry, ensuring good governance, transparency and accountability, establishing rule of law and strengthening institutions will remain challenges in the next fiscal year, he said.
Terming the outgoing fiscal year as challenging, a former president of Bangladesh Garment Manufacturers and Exporters Association Anwarul Alam Chowdhury Parvez said that businesses passed the year amid hope and despair due to political unrest.
‘In the first half of the year we hoped that the business would grow with accelerated investment that vanished in the second half due to political instability and vandalism,’ he said.
No progress in infrastructure, energy supply, good governance, safety and security situation also held the businesses back from making new investment, he said.
Bangladesh Employers Federation former president Fazlul Haque said that the outgoing fiscal year was not worth mentioning for the business community.
‘There was political instability while the long-standing barrier to investment continued in the year,’ he said.