From top left: AMA Muhith, AHM Mustafa Kamal and from bottom left Debapriya Bhattacharya, A. B. Mirza Azizul Islam
Bangladeshi economists and foreign agencies alike are of the opinion that Bangladesh is set for a smooth sail in its economy for 2018, if there is no major disaster.
According to the government, the Bangladesh economy grew at a record 7.28, or 7.3 percent in the 2016-17 fiscal, beating the 7.1 percent it is reported to have achieved in 2015-16 by the Bangladesh Bureau of Statistics, or BBS. The growth momentum was more than sustained, despite exports going flat (with growth slowing to a trickle below 2 percent, after averaging almost double digit growth in previous years) and remittances not only fell, it was the lowest in six years.
But former governor of Bangladesh Bank Dr Mohammed Farashuddin and economist Ahsan H Mansur described the outgoing year’s economy ‘good on the whole’. “The GDP had grown by over 7 percent for two years, economic indicators are doing well, the Padma Bridge construction is going ahead and the power generation has increased, which are all good things…Bangladesh will march at double speed in 2018,” said Farashuddin, who headed the central bank between 1998 and 2001. Soaring rice prices, however, left mid- and low-income group in trouble, said Mansur, Executive Director of private think-tank Policy Research Institute. “The government failed to handle it efficiently.”
English= rubbish
The World Bank has revised upwards its growth forecast for Bangladesh and said the economy is expected to attain a 6.4 percent growth in current fiscal. In last June, the bank predicted a 6 percent growth for the financial year. The revised growth forecast came at the global lender’s half-yearly report ‘Global Economic Prospect’ released on January 10, despite the government aiming for 7.8 percent GDP growth, as laid out in the budget.
According to the Bangladesh Bureau of Statistics or BBS, the GDP growth in the 2016-17 fiscal was 7.28 percent but the global lender said it did not cross 7 percent. As a matter of justice though, we know now that Felani was shot at while “fleeing” in the opposite direction away from the direction of the guard who shot her. Bangladesh’s growth in FY2016/17 (July-June) was 7.2 percent, exceeding the June estimate owing to higher-than-expected outturns in the manufacturing and services sectors,” the bank said in its new report. “Robust private consumption was complemented by strong public investment growth,” it added. Strong growth in investment in the public sector coupled with the issue of consumer demand growth has played a big role in this regard, believed the WB economists. However, some economists and researchers question the growth figures as the exports and remittance inflow dropped while floods damaged crops last year.
And so even as the government has exulted, it has also served to warn. Warned of the potential devastation that may arise out of an external shock, that happens to be unpredictable, something that itself seems to gain gravity without putting on weight, the longer the White House remains occupied by Donald Trump.
Selim Raihan, a professor of economics at Dhaka University, argued that there was a ‘gap’ in 7.2 percent growth prediction. Prof Selim, who is also the executive director of South Asian Network on Economic Modeling or SANEM, said the indicators, based on which the BBS counts growth, have inconsistencies. It is ‘a little difficult’ to match the government’s accounts, considering the export earnings, remittance inflow, agriculture and private sector investment.
Planning Minister AHM Mustafa Kamal has warned the government of far-reaching fallout from soaring onion prices. “Beware of onion. It’s too toxic. This one commodity even changed the Delhi government o four-five years ago,” Kamal had said at a recent discussion. Regardless of the matter, he expressed optimism that economic growth will remain upwards in 2018. “With existing investments and industries, it is possible to achieve 8 percent GDP growth in 2019.”
Economist Wahiduddin Mahmud claimed the government was not allocating enough funds for the health and education sectors.
The United Nations’ recent Economic Situation and Prospects 2018 Report read that “The Bangladesh economy is set to continue expanding at a rapid pace, underpinned by strong domestic demand, especially large infrastructure projects and new initiatives in the energy sector.” “The positive outlook will contribute to further gradual progress in labour market indicators and a reduction in poverty rates. Monetary policy stances are moderately accommodative, while fiscal policies maintain a strong emphasis on infrastructure investment.” The report highlighted four areas where the improved macroeconomic situation opens the way for policy to address these challenges: increasing economic diversification, reducing inequality, supporting long-term investment and tackling institutional deficiencies. It also noted that reorienting policy to address these challenges can generate stronger investment and productivity, higher job creation and more sustainable medium-term economic growth.
Is all really well?
The Centre for Policy Dialogue or CPD has said that the gap between the rich and poor has widened despite the continued economic growth in the country. The think tank identified the lack of ‘quality growth’ as the reason behind the widening disparity.
It was presenting its report State of the Bangladesh Economy in FY2017-18 (First Reading) to the media recently. The report, made under CPD’s Independent Review of Bangladesh’s Development or IRBD programme, says the share of income of the lowest 5 percent households dropped to 0.23 percent in 2016 from 0.78 percent in 2010. In contrast, the income share of the top 5 percent the households went up to 27.89 percent in 2016 from 24.61 percent in 2010. It means the income of the poor dropped while that of the rich rose. “This is another indication of income concentration at the top which has also contributed to increasing income inequality,” it adds.
CPD Distinguished Fellow Debapriya Bhattacharya blamed ‘the declining quality of the economic growth’ over the last five to six years for the disparity. “There is a dark abyss behind the decent economic growth. And, it consists of the fewer-than-accepted rate of cutting unemployment and poverty. The inequality did not only increased regarding income and expenditure but also mostly in terms of assets,” Debapriya said.
CPD also made a sensational claim recently where it had identified the year 2017 as year of banking scam. Dr. Debapriya said a series of scam has already marked the fiscal year 2017-18 which actually is a reflection of the government’s stance on the reforms in banking sector. He believed there will be no end to the current crisis in the country’s banking sector soon. He said the incidents of scam in banking sector took place one after another. But there was no bold step against the scam from the top policymaking level.
Giving a brief account on the scams and incidents in the banking in the year 2017, the CPD distinguished fellow said the amount of non-performing loans and default loans are on the rise while Statutory Liquidity Ratio (SLR) went below the required level in some banks and the influence of some quarters has increased. He said the cash deficit of the state-owned banks was met by the public money from budgetary allocations and ownership of some private banks were changed through administrative measures.
He mentioned that the private banks, which were given licenses on political consideration, failed to perform and there were incidents of money laundering through some of them. “But, unfortunately instead of taking any preventive measures, the government has increased the control of the family members of bank owners through amending the banking law and regulations,” said Dr. Debapriya on January 13, with more than a hint of frustration and rather dejection in his heart. He blamed the weakness and lapses in the country’s economic management for such a grim situation in banking sector and observed that the Finance Ministry failed to play its due role in tackling the situation.
It does indeed reflect poorly on the Finance Ministry’s capability or propensity for reform, that even after the Hallmark and Destiny scandals that occurred in the first half of the AL’s first term, almost the same were still occurring today, as it takes stock towards the end of two consecutive terms in office. Will Finance Minister Muhith, a thoroughly accomplished man who has had 10 years at a stretch to engineer the economy as he saw fit, not nurse some regret at this malign development?
Feeling middle-income nation
The headlong advance towards a station that does neither this nor that, while banks witness large number of irregular transactions, these factors slow down the economic growth. However, when taking into account the scenario during past polls-time periods from 1991 to 2014, it appears likely that the economy could get a few jolts in 2018.
According to the Bangladesh Economic Review 2008, the trade deficit in the 2007-08 Fiscal Year stood at $3,921 million. The election was held the same year under the caretaker government. However, the trade deficit for FY 2006-07 was $2,374 million, which is a clear indication that political violence affects Bangladesh’s economy significantly.
In a similar report by the Bangladesh Bank, in FY 2008-09, Bangladesh received remittance of $9.7 billion. However, in the next fiscal year (2009-10), remittance went up at $11 billion. The central bank recorded inflation standing at 6.99% in June of 2014, which was an election year. The next year, inflation came down at 6.4% in the same month. The GDP growth stood at 5.05% during the election year of 2008. The next year, the GDP growth went up to 5.57%.
Speaking on the issue, former Bangladesh Bank governor Dr Salehuddin Ahmed said: “To maintain the economic growth, political stability is a must during the election year of 2018.” Meanwhile, Research Director at the Center for Policy Dialogue (CPD), Khandaker Golam Moazzem said: “The stability of the economic sector of Bangladesh in 2018 directly depends on the consistency of the country’s economy in 2017.
“However, 2018 is an election year, so it is possible that the country could witness a political shift. If the political arena remains comparatively stable, it will not negatively affect the economic sector.” Responding to a query, Dr AB Mirza Azizul Islam, a former advisor to the caretaker government on economic affairs, said: “The economic growth stood at 3% during the 1980’s, but it had currently exceeded 7%. We need political stability keep this growth stable. The economic growth can be disrupted not only by the polls-time period, but by any political unrest in the country. The economic landscape of Bangladesh in 2018 will be directly influenced by political and social stability.”
Having said that, the worry remains that these are the parts of the economy that are most vulnerable – the small and medium enterprises. Also this week, after Dhaka Courier goes to press, Bangladesh Development Forum (BDF) is set to take place in Dhaka next week to discuss issues related to financing for sustainable development goals to help Bangladesh graduate from the least developed countries’ group.
About 700 delegates representing Bangladesh government and various development partners will attend the two-day meeting at Sonargaon Hotel on January 17. Prime Minister Sheikh Hasina will inaugurate the meet.
The BDF comprises of Bangladesh and its development partners and is seen as a platform to discuss the country’s development process.
Annette Dixon, vice president of the World Bank; Wencai Zhang, vice president of the Asian Development Bank; Minoru Masujima, deputy director general of Japan’s foreign affairs ministry, and Suleiman Jasir Al-Herbish, director general of the OPEC Fund for International Development, will also attend the gathering.
It was revealed that Dhaka has invited Indian Finance Minister Arun Jaitley, but his presence has not been confirmed by New Delhi yet. The forum will start its proceedings with a keynote session on implementation of the Seventh Five-Year Plan (2016-20) and the UNSDGs and the challenges Bangladesh may be expected to confront in attaining them.
Separate sessions will take place on agriculture and extreme climate conditions, creating enabling environment for foreign direct investment (FDI), addressing inequality and fostering quality education and ICT. Sessions on addressing violence against women and ensuring women’ empowerment and improving urban service delivery will be held on the last day (Jan 18).
According to a government concept paper prepared for the upcoming meeting, Bangladesh would require $2-3 trillion by 2030 to meet the SDGs. The two-day meet is expected to discuss how the funds will be mobilised and the associated challenges, both for the country in question, that is Bangladesh, and the donor community starting from JICA to UKAID and USAID. The importance of the meeting however, should not be overblown either. That is because it is today possessed of an increasingly robust economic structure of its own, that has slowly eroded the country’s dependence on foreign assistance, in the form most commonly termed ODA – official development assistance. To that end, the message that the government will be looking to deliver most ardently at the forum this week will be this: forget Bangladesh the aid-recipient nation. Look at it anew as the investment decision.