Published on UNB online; republished in The Daily Sun, The News Today, The Independent and The Daily Observer on Saturday, 22 March 2014.
GDP growth to finally stand at 5.6pc: Mirza Aziz
BB forecasts 5.8-6.1pc growth against targeted 7.2 pc
AKM Moinuddin, UNB Staff Writer
Dhaka, Mar 21 (UNB) – The country’s GDP growth will be around 5.6 percent in the current fiscal year, the lowest in over a decade, says a renowned economist though Finance Minister AMA Muhith still looks optimistic about achieving ambitious 7.2 percent target.
“My observation is that the growth will definitely remain below 6 percent. As per my estimate, it’ll be 5.6 percent,” former finance adviser to a caretaker government Dr AB Mirza Azizul Islam told UNB explaining why the growth will be lower this time.
However, the Bangladesh Bank (BB) forecasts that the GDP (gross domestic product) will stand at a range between 5.8 percent and 6.1 percent, which is also far below the Finance Ministry’s target.
“Our forecast, given in the last monetary policy statement, still remains unchanged. BBS (Bangladesh Bureau of Statistics) will ultimately tell us…we can only forecast. But we think the final figure will remain within the range between 5.8 and 6.1 percent,” BB Chief Economist Dr Hassan Zaman told UNB.
Asked whether they disagree with the Finance Ministry’s observation, the central bank chief economist said it is normal to have often different forecasts in a ‘mature economy’. “At the end of the day, the statistical agency will come up with the figure. Let’s see what the BBS says.”
On March 12, Finance Minister AMA Muhith said in Parliament that the government has decided to keep the country’s GDP growth target of 7.2 percent for the current fiscal year unchanged.
Muhith, while presenting the first quarterly report on the state of Bangladesh economy in the House, also said it would not be tough to attain the targeted GDP growth of 7.2 percent if the industrial production picks up and Aman as well as Boro harvests are satisfactory.
Data show that GDP growth acceleration, so critical to realising Bangladesh’s ambition of becoming a middle-income country and graduating from the LDC bracket, has been lost in recent years.
Since FY 2011, the GDP growth has been on a downtrend — 6.71 percent in FY 2011, 6.23 percent in FY 2012 and 6.03 percent in FY 2013.
Asked how the Finance Minister expects higher growth, Mirza Aziz said the Finance Minister is not giving any explanation on what basis the target will be achieved.
Explaining his calculation, the economist said the remittance growth, by the end of the current FY, will remain negative if it is compared with the last FY’s growth while the export has started decelerating though it performed well in the previous months.
On the growth of domestic consumption which accounts around 75 percent of GDP, Mirza Aziz said the private consumption has declined for various reasons resulting in lower earnings from the VAT (value added tax) and the consumption growth will remain much lower than that of the previous FY.
Similarly, private investment growth will definitely remain lower than that of the previous FY, he said adding that the government’s investment is also declining.
“So, if the scenario is that how and where the GDP growth will come from? So, over 6 percent growth is impossible,” said the economist reminding that the country witnessed 6.03 percent growth in the fiscal year 2012-2013.
BB chief economist Dr Zaman, however, said the GDP growth in the current fiscal year could have been higher (from BB’s forecast) if the country could avert the losses the economy suffered in the first half of the current FY due to various factors, including the prolonged political chaos.
Asked whether they disagree with the Finance Ministry’s GDP target setting, the central bank economist said a target can be set but the question is how much ‘realistic’ the target is.
“You can easily draw a conclusion on your own if you look at the gaps between the targets set by the Finance Ministry in last five years and the ultimate results,” Dr Zaman said.
He laid emphasis on having coordination meetings involving the Finance Ministry, Planning Ministry, other government agencies and private think-tanks to share forecasts and views on economic trends.
Asked whether it would be judicious to set similar growth target for coming fiscal year when target for the current fiscal year is likely to remain unmet, Mirza Aziz said, “We can set higher target but the question is whether proper grounds are created for a massive jump.”
Aziz lso said he does not see any sign and steps that can boost investment, consumption and remittance inflow which are a must for a massive jump in terms of GDP growth.
The economist expressed doubt whether the prevailing political stability will sustain as situation may change after the upazila polls being held in phases.
Entrepreneurs formulate investment plans considering investment environment in the long-term. The investment is unlikely to get momentum in the coming months as political uncertainly appears to return for various reasons, Mirza Aziz said.
Talking to UNB, economist Dr Mustafa K Mujeri said it would be an impressive one if around 6 percent GDP growth is achieved at the end of the fiscal year. “However, it depends on how we can recoup losses in the remaining months.”
The economist, also the Director General of the Bangladesh Institute of Development Studies (BIDS), said he does not see any significant sign or steps that can expedite growth at this moment.
Reviewing the macroeconomic performance in the first half of fiscal 2013-14, the Centre for Policy Dialogue (CPD), a civil society think tank, says the GDP growth might slip below 6 percent this fiscal year.
The CPD expects the economy to grow between 5.6 percent and 5.8 percent if there is no major supply disruption and political turmoil in the remaining months of the current fiscal.
All the international bodies – the World Bank (WB), International Monetary Fund (IMF) and Asian Development Bank (ADB) — are putting the GDP growth figure below 6 percent against the government target of 7.2 percent.