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Higher economic growth sans sufficient job creation

S M Jahangir | December 11, 2018 00:00:00

Bangladesh's economy continues to expand over the years. The state statistical agency - Bangladesh Bureau of Statistics (BBS) - estimated the country's gross domestic product (GDP) growth at 7.86 per cent for the fiscal year (FY) 2017-18. The government in its budget for FY 2018-19 has projected the country's GDP growth at 7.8 per cent. However, some government policymakers expect that Bangladesh's economy would grow at 8.2 per cent at the end of FY 2018-19.

On the other hand, multilateral lenders or development partners including World Bank (WB), International Monetary Fund (IMF) and Asian Development Bank (ADB) have made their respective estimates on Bangladesh's economic growth.

In its latest report, the WB had projected a 7.0 per cent GDP growth for Bangladesh in the fiscal 2018-19. The WB made the projection in its report on 'Bangladesh Development Update: Powering the Economic Efficiency', which was released in October, 2018.

The International Monetary Fund (IMF) in its World Economic Outlook 2018 (WEO) in October, 2018 also forecast that Bangladesh economy would grow at a rate of 7.1 per cent for 2019 (FY18-19).

According to the latest projection of the ADB, Bangladesh's GDP might grow by 7.5 per cent for the fiscal 2018-19.

Whatever may be the growth projections, Bangladesh economy desperately needs to grow a decent pace and become a middle-income country by 2021.

In the meantime, Bangladesh has already met certain criteria for graduation from its status of least developed country (LDC).

Despite having the rising official figures on GDP growth and fulfillment of such criteria for higher status, there remain debates and strong criticism over the quality of Bangladesh's economic growth.

Tackling income inequality, reduction of poverty rate and creation of required jobs for a large number of its unemployed population are still, among others, big challenges for Bangladesh.

The Finance Minister himself, on the other day, termed Bangladesh economic growth a 'jobless growth' which is a major problem.

According to him, the country was facing a big problem that is jobless growth.

Usually, jobless growth is a situation where the economy expands with generating fewer jobs than required.

Mr. Muhith also talked about mismatch between figures of the BBS and the ground realities.

Many economists have also expressed their fear that Bangladesh might face the risks of middle-income trap and jobless economic growth, which is not sustainable.

According to a recent report of International Labour Organisation (ILO), the rate of youth unemployment in Bangladesh remained one of 'the most worsening' situation among the countries in the Asia-Pacific region.

The country's overall unemployment rate rose by 1.0 percentage point in 2017, said the ILO in its 'Pacific Employment and Social Outlook 2018'.

On the other hand, Bangladesh's youth unemployment rate increased by 6.4 percentage points in 2017 since the year 2010, it revealed.

"… the countries experiencing the most severe worsening situation of youth unemployment were Bangladesh (+6.4 percentage points), Pakistan (+5.3) and Vietnam (+3.7)," the report said.

According to a study paper, presented at a recent programme of the state think-tank Bangladesh Institute of Development Studies (BIDS), the country's unemployment situation among youth projects a bleak picture.

About 10.6 per cent of the youth labour force - aged between 15 and 29 years - remained unemployed in 2016-17, the report revealed.

Apart from the unemployment situation, the issue of rising income inequality has emerged as another big problem for Bangladesh.

According to the World Ultra Wealth Report 2018, recently published by the WEALTH-X, the ultra-high net worth (UHNW) population in Bangladesh posted a 17.3 per cent rise just over the last six years - between 2012 and 2017.

The local private think tank --Centre for Policy Dialogue or CPD - in its recent report on State of the Bangladesh Economy in FY2017-18 said the gap between the rich and the poor has widened despite the continued economic growth in the country.

It also identified the lack of 'quality growth' as one of the major reasons for the situation.

The share of income of the lowest 5.0 per cent households, according to the CPD report, declined to 0.23 per cent in 2016 from 0.78 per cent in 2010.

On the other hand, the income share of the top 5.0 per cent the households went up to 27.89 per cent in 2016 from 24.61 per cent in 2010.

Such figures indicate that the income of the poor dropped while that of the rich increased.

A study paper, presented recently by distinguished fellow of the CPD Dr Debapriya Bhattacharya at a lecture programme of the BIDS, said Bangladesh economy - in terms of consumption, income and assets - has become more unequal in the recent decade, especially between 2010 and 2016. According to the paper, income inequality in terms of Gini coefficient has increased in Bangladesh along with rise in per capita national income during the period mentioned above.

The Gini coefficient or Gini index is a statistical measure (the value of a Gini coefficient varies between 0 and 1 where a value of zero signifies perfect equality and 1 indicates maximum inequality) generally used to examine a country's degree of income inequality that exists at a particular point in time.

On the other hand, although there has been a certain progress in the country's poverty situation in the recent decades following rising economic growth, a notable portion of the population are still living under the poverty lines - both lower and upper poverty lines.

According to successive Household Income & Expenditure Survey (HIES) of the BBS, the share of population living under the upper poverty line more than halved to reach 24.34 per cent in 2016 from 48.9 per cent in 2000.

In terms of lower poverty line, around 13 per cent of people were living under extreme poverty in 2016, according to the BBS statistics.

However, there was a slowdown in the rate of poverty reduction in the post-2005, notwithstanding the acceleration of the GDP growth rate, according to analysts.

Apart from the rising income equality, exiting unemployment problem and poverty situation, there also remain some other bottlenecks, including the "sorry state" of the financial sector, sluggish capital market, poor infrastructures and inadequate institutional capacities, in the country.

Considering the overall situation, one can argue that higher economic growth has failed to yield the desired outcomes in society.

According to economists and experts, the benefit of the economic growth has not been evenly distributed in society.

So, there is an urgent need for paying due attention to quality than the numbers to get the expected benefits out of the countries economic growth.

The writer is Chief Reporter of The FE.


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