Published in The Financial Express on Thursday, 21 April 2016
Leaping to a higher growth trajectory
Jafar Ahmed Chowdhury
Mathematics is a useful tool to quantify economic and social behaviours. But social behaviours and economic behaviours vary from time to time so that these cannot be quantified accurately all the time. So is the case with the calculation of gross domestic product (GDP) and its growth rate. There are differences among different agencies (World Bank, Asian Development Bank, IMF and others) in the projection of possible growth rate of Bangladesh for the financial year 2015-16. The World Bank and the Asian Development Bank project a 6.7 per cent growth rate for Bangladesh. The Bangladesh Bureau of Statistics (BBS) has estimated 7.05 per cent growth rate. The government is happy as the economy is going to break the “six per cent growth trap”. The estimate found that the per capita income of a Bangladeshi citizen has risen to US$ 1466. It can be recalled that only in 2006-07, the country’s GDP grew at 7.06 per cent. After that the growth rates were below 7.0 per cent till 2014-15. One may question all the projections as mentioned above. In an article published in the Financial Express on June 09, 2015, this writer made an analysis and showed that 7.0 per cent GDP growth and beyond was attainable. In that article titled “Is 7.0 per cent GDP growth attainable?”, this writer wrote, “Boosting private sector investment and job creation for millions of unemployed youths are two major challenges. These can be met by creating an investment friendly environment in the country. Setting up of special economic zones and supply of gas and electricity should be the right steps. Non-economic factors like political stability and good governance are also required. Then the economy will be able to grow at 7.0 per cent and beyond. . . . In that event none would need to depend on inflated projections and estimates.” The economy has various weaknesses: non-expansion of the tax base, less than desirable private investment, stagnating employment situation, dearth of gas and electricity to meet industrial demands, bleak banking outlook, slow ADP implementation, slowing down of foreign remittance, unstable capital market, lack of good governance and so on. There are, on the other hand, positive factors that should energise the economic state, such as– political stability, low price of PCL in international market and export performance of the RMG sector. In a narrower sense, investment and job creation for millions of youths are essential for sustainable growth. On April 17, 2016 the private think tank CPD (Centre for Policy Dialogue) released the second read of “State of Bangladesh Economy in 2015-16”. The researchers made some important comments and recommendations. According to CPD, the gap between the budgetary targets and actual realisation between FY 2008-09 and 2015-16 has progressively risen. That resource mobilisation structure is poor and the growth of income tax is sluggish. The CPD apprehends a shortfall of Tk 380.0 billion in revenue collection. It finds that while some 1.38 million jobs were created annually between 2003 and 2013, a total of 0.6 million jobs were created between 2013 and 2015. It means that the acceleration of GDP growth has not been accompanied by enhancement of private investment and jobs for the large young labour force. On the other hand, implementation of annual development programme (ADP) shows that only 41 per cent of original allocation of Tk 1.0 trillion (including allocations for the autonomous bodies) could be spent in the last three quarters (July-March) of FY 2015-16. ADP has been revised. The size of the final ADP stands at Tk 9.39 billion. Surprisingly, 95 per cent of revised ADP is going to be spent within June, 2016. Here arises the question of quality implementation. In the banking sector, there were several scams including cyber heist of the reserves of Bangladesh Bank. The non-performing loans are piling up, particularly of the state-owned commercial banks. Recently, the London-based BMI Research showed various weaknesses of state-owned banks of Bangladesh. Their report says that Bangladesh’s banking sector is one of the weakest in Asia. They identified factors like low capital adequacy, poor asset and management quality, surging non-performing loans, lack of profitable lending opportunities and rise in domestic security threats for a bleak situation. Workers’ remittance from abroad, particularly from Middle Eastern countries, decreased this year compared to last year. Fuel prices fell by around 65 per cent. Statistics show that as of February 2016, average monthly remittance from Saudi Arabia was US$ 247 million as against US$ 279 million last year and remittance from UAE fell from US$ 235 million to US$ 220 million. The issue of good governance is very important. The World Economic Forum in its “Global Risk Report 2016” has mentioned that lack of good governance is the top most economic risk. These and other weaknesses need to be addressed properly to steer the economy to a higher growth trajectory.
The writer is an economist and former secretary to GOB