The country's GDP (gross domestic product) growth rate is likely to climb above 7.0 per cent in the 2015-16 fiscal. Releasing the statistics recently, the Bangladesh Bureau of Statistics (BBS) went on to predict that the GDP growth rate this year will rise to 7.05 per cent against 6.55 per cent during the last fiscal. This is the highest in nine years. According to the BBS, industry and service sectors are going to be the main contributors.
Although provisional, the possibility of GDP growth rate has come as a matter of great relief for Bangladesh, particularly for its planners, who had been trying but achieving very little beyond 6.0 per cent over the last few years. In fact, GDP growth in Bangladesh has been revolving around 6.0 per cent during the last half a decade.
Alongside prediction by the BBS of a redeeming scenario of increased GDP growth, the planning minister a couple of days later divulged a piece of information that will make us retreat a few steps behind. The minister said inflation in the country has edged upwards to 5.65 per cent in March due mainly to rise in food prices. Non-food inflation has however gone slightly down compared to previous month. Since food inflation dictates all other product or commodity inflations, it may turn out as a cause for concern later. Â
As propounded by economists, inflation beyond certain measure impedes economic growth and hence it is no welcome news by any stretch of imagination. In fact, inflation and economic growth run parallel and never meet each other. Inflation and economic growth are incompatible because the former affects all sectors of the economy. Inflation reduces purchasing power resulting in higher expenditure. On the external front, inflation causes fluctuations in exchange rates and adversely affects trade (export and import), important business transaction across borders, and changes the value of money. With inflation undoing the efforts of growth, the viability of predicted GDP growth may be questioned indicating that inflation must be kept under control.
Another development is that private consumption to GDP ratio fell by 2.23 per cent in current fiscal year. This has happened mainly due to a decline in foreign remittance warranted by low price of oil in international market. Private consumption and GDP ratio fell to 70.21 per cent in the nine months of 2015-16 from 72.44 per cent last year, according to provisional data from Bangladesh Bureau of Statistics and remittance went down by 1.82 percent in the first nine months of the current fiscal year compared to the corresponding period last year, according to The Bangladesh Bank. The BB says, the average monthly remittance as of February, 2016 was $247 million from Saudi Arabia and $220 million from the UAE, compared to $279 million and $235 million respectively during last fiscal year. If remittance continues to fall which may be likely in view of decreasing employment abroad, things will deteriorate further raising doubts about achieving the predicted growth rate.
Another piece of disconcerting news is that private investment as a percentage of GDP in the current fiscal year decreased this year for the first time in three years. Although the decrease is negligible for all practical purposes, this is not an encouraging sign from growth sustainability point of view. This goes to suggest that economic and social infrastructures that make it conducive for the private sector to invest need to be in place to help the economy to forge ahead. The existence of infrastructure facilities may increase the productivity of private investment, which can then take advantage of better overall infrastructures and potentially improved business conditions. This would result in having a crowding-in effect on private investment.
Unless all these things are taken care of in due earnest, achieving the predicted growth rate will be difficult, if not impossible.
saleh.akram26@gmail.com
Going beyond growth target!
Saleh Akram | Published: April 13, 2016 00:00:00 | Updated: February 01, 2018 00:00:00
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