Published in The Financial Express on Friday, 27 December 2013.
GDP growth rate may drop to below 5.0pc
Economists cite political unrest as reason
Jasim Khan
The country’s leading economists projected that the annual Gross Domestic Product (GDP) growth rate might fall to a record low of the decade to below 5 per cent this fiscal (2013-14) if the political instability continued further.
The International Monetary Fund (IMF) recently has forecast Bangladesh’s economic growth at below 6 per cent in the 2013-14 fiscal year (FY), whereas the government had set a target of 7.2 per cent for the period.
“It is very much possible to keep the GDP growth for the fiscal year to the lower end of 5 per cent. But if the political unrest continues, the growth rate would go below five per cent.” Dr Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD) said.
From 1994 to 2013, Bangladesh GDP annual growth rate has averaged 5.6 per cent reaching an all-time high of 6.7 per cent in June, 2011, and a record low of 4.1 per cent in June, 1994.
Export and import trade has faced setback, production and supply got disrupted and future investment has become uncertain due to the political programmes like hartal (shutdown), the economists observed.
They said the most worrying factor was that the shutdowns were affecting the service sector, which accounts for more than 50 per cent of the country’s GDP.
Services’ growth declined from 6.3 per cent in FY 12 to 6.06 per cent in FY 13, owing to the direct impact of strikes and political violence.
“We are watching a slowdown in the economic activity as some special indicators, like import, export and credit to the private sector, are showing a sluggish trend.
All of these indicators point out that the economy is limping,” Mirza Azizul Islam, adviser to the former caretaker government, said.
“The indicators are very important for the economy, and they are likely to slowdown in the next six months due to the political uncertainty, labour unrest and poor demand of private sector credit,” he added.
Mr Islam said hartal should not be a weapon for solving political crisis.
Businessmen while producing goods for international markets have to encounter lots of problems, and now it is the responsibility of the political parties not to harm the timely marketing, he added.
Dr Bhattacharya said the economic performance would depend on how the economy works in next six months of the fiscal (January-June). “If the situation improves and political stability returns, the economy may come back to life again,” he added.
He however, said the prospect was bleak as no sign of political normalcy could be seen at the current stage of ‘confrontation’.
Salehuddin Ahmed, former Bangladesh Bank governor, said the overall macroeconomic achievements had turned pale because of the political chaos. If the hartal culture was not stopped, it would ruin the economy further, he added.
If honest individuals are not placed at right positions, good governance and political will are not ensured, the economic condition will deteriorate further, the economists observed.
Within the services the most important segments are wholesale retail and trade (14 per cent of total GDP). Transport, storage and communication (11 per cent) and real estate, renting and business activities (7 per cent) are the major sectors hit hard in the turmoil, they said.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI) of Bangladesh, a private think tank, said attaining even 6.03 per cent GDP growth (achieved in 2012-13) would be a tough job, if such political programmes persisted. Dr Mansur said general strikes were affecting the services sector, which accounted for more than 50 per cent of the country’s GDP.
“The rising cost of living has already put the common people under severe hardship. The continuation of the present confrontational politics and frequent shutdowns would further worsen the situation,” he noted.