GDP likely to fall 5.6pc: WB
Dhaka: The World Bank has lowered the country's gross development growth projection to 5.6% for the current fiscal year (FY15) from the targeted 7.3% due to the political turmoil.
‘Growth in FY 15 is likely to decrease to 5.6% due to the political turmoil,’ said World Bank Lead Economist Dr Zahid Hussain while releasing the Bangladesh Development Update 2015 at its Dhaka office. World Bank country director Dr Johannes Zutt was present.
The World Bank Lead Economist, however, said had there been political stability, the growth in FY 15 could have reached 6.4 or 6.6%. But, since the country's GDP has been affected by around one percent this year due to political turmoil, the GDP growth could stand at the end to 5.6%.
He also said it would not be a matter of surprise if the GDP growth stands at 6.3 or 6.4% at the end of the current fiscal year by the estimation of Bangladesh Bureau of Statistics (BBS). ‘But, it won't prove that the economy was not affected by the political stalemate.’
Zahid Hussain through his power-point presentation showed that with stability, strong domestic demand base, gradually improving investment climate and single digit inflation are expected to raise GDP growth to 6.3% in FY 16 and 6.7% in FY 17.
He also mentioned that the $ 2.2 billion estimated loss to the country's economy in the current year due to political turmoil is being calculated over the current fiscal year's estimated GDP size.
Listing some of the challenges that the country's economy are likely to face in the coming days, Dr Zahid said on-again and off-again political instability and violence affects the economy adversely in the short- and medium-terms.
He said political instability is not the only challenge, preserving fiscal space, exchange rate flexibility, and improving accountability for delivering on reforms will also be critical for facing the challenges.
To get out of the 6% GDP growth trap that the country is facing over the last few years, the World Bank official emphasised the need for increasing investment by at least 5% points of GDP from the current 28.7% as well as raising the female labour force participation rate by easing the barriers for women’s entry to the labour market.
On reinventing the demographic dividend, Dr Zahid said Bangladesh is well into the third phase of demographic transition shifted from a high mortality-high fertility regime to a low mortality-decreasing fertility one.
He said labour markets remain divided along gender lines while growth and stability are necessary to give women the opportunities they need, women's participation in the labour market is also part of the growth and stability equation.
Answering to a question, World Bank Country Director Johannes Zutt said the World Bank has been discussing with the government about providing budget support.
He said the Washington-based lending agency is currently discussing reforms in Bangladesh's energy, transport, economic zones, trade, but agreement is yet to be reached.
About the country’s development needs of around $ 4.5 to $ 5 billion in the coming years from the World Bank, Johannes said the World Bank was thinking about enhancing its fund for Bangladesh.
In this connection, he said Bangladesh could tap the regional IDA fund of the world Bank or could tap the fund from IBRD of the World Bank Group since the country is yet to tap the IBRD resources, which is a non-concessionary arm of the World Bank group.
The World Bank country director also welcomed the presence of new development banks like China-led AIIB and BRICS hoping that these would be able to fill up the huge financing gaps globally.
About steep fall in global oil price over the last eight months, he said it is a very good opportunity for oil importing countries like Bangladesh for restructuring fuel subsidies since subsidies in this regard helps the rich much more than the poor.
He hoped Bangladesh would continue to grow and grow substantially while investment in health and education are very much important in this regard.
Replying to a question, Dr Zahid Hussain said it would not be easy for the government to implement the probable budget size of Tk 3 Lakh crore and the ADP size of TK 90,000 crore in the next year since the government lacks adequate preparations for revenue collection.
He also suggested overcoming the limitations of data collection system and accounting system of BBS, improvement in the management of petroleum sector since fuel price fall created opportunities, and thus creating and maintaining a business-friendly environment.
Dr Zahid, in his presentation, also touched upon on some features like growth recovery interrupted by the turmoil, job friendly growth in recent past, inflation contained, comfortable external balance, export competitiveness at risk, continuity in monetary policy, weak revenue growth, low fiscal deficit, mixed progress on structural reforms, reducing inflation, stock of non-performing loans and linking National Savings Certificate rates to benchmark deposit rates to deal with the interest rates.