The current fiscal year's economic growth rate is provisionally estimated at 7.24 per cent. With nine months' data in hand, the national statistical body revealed the estimate of national accounting. Provisional estimation means the data are subject to revision once the data of the whole year are available.
But the estimated growth rate of the Gross Domestic Product (GDP) has already sparked debate and discussion. In this discourse, some are raising question about the authenticity of the data, some are not finding sufficient support to back the growth rate and some are arguing that the 7.24 per cent growth is a natural outcome of economic activities.
The Bangladesh Bureau of Statistics (BBS) is the authorised body to estimate and finalise economic growth rate as well as other national accounting indicators. So, it is the BBS data that ultimately prevail. It doesn't, however, mean that no one will question the statistics of national income.
Provisional estimation showed that 7.24 per cent growth is above the target of 7.20 per cent, set at the Seventh Five Year Plan (7FYP). This is also the consecutive second year when growth rate crossed 7.0 per cent -- a psychological barrier. In the past fiscal year, GDP growth rate was estimated at 7.11 per cent.
What are the main drivers of the 7.24 per cent growth? Of the three broader sectors, growth rates for agriculture and service increase while rate for industry drops (see: Table). It doesn't necessarily mean that agriculture and service sectors are fuelling economic growth while industry is lagging behind. Interestingly, with reduced growth rate, industry's contribution to GDP increases to 32.48 per cent in the current fiscal year from 31.54 per cent in the past fiscal year. On the other hand, contribution of agriculture and service declined to 14.79 per cent and 52.73 per cent respectively from 15.35 per cent and 53.12 per cent.
The decline in industrial growth, however, may be considered a reflection of stagnation of private investment which inches to 23.01 per cent of GDP in FY17 from 22.99 per cent of GDP in FY16. Despite the stagnation, the private sector is contributing to the bulk of investment as a percentage of GDP. Stagnation in private investment is, however, offset by the higher ratio of public investment which stands at 7.26 per cent of GDP. The ratio was 6.66 per cent in the past fiscal.
Thus, overall investment-GDP ratio is not increasing. It stands at 30.27 per cent and is close to the 7FYP target of 23.90 per cent. But the Incremental Capital Output Ratio (ICOR) indicates that investment efficiency needs some attention. The ICOR in the current fiscal year is estimated at 4.18 which remains almost unchanged from the last fiscal.
ICOR generally measures how many additional units of capital are necessary to produce one additional unit of output. The higher the ICOR, the lower the efficiency of capital. 7FYP document, however, mentioned that China, emerging economies in East Asia and India experienced higher ICOR. The Planning Commission is right that most of the reasons behind high ICOR in Bangladesh are similar to those found elsewhere. But one critical feature, not visible in many other countries, is the padded-up project cost. This not only suppresses capital productivity, but also distorts the viability of many projects.
One may, however, question the relevance of ICOR when service sector is contributing around 53 per cent of GDP and when the relationship between capital investment and output is not very clear.
Moreover, increased public expenditure may also lead to high GDP growth despite a depressed investment climate which can then send some misleading signal about the capital productivity.
Again, another problem area of provisional estimation of GDP is statistical discrepancy. GDP estimated by the expenditure categories experienced a huge statistical discrepancy in the current fiscal as the value stands at Tk 201.98 billion. This is the highest amount of discrepancy in recent years.
The discrepancy is likely to reduce after finalisation of the national accounting as it happened last year. On provisional count, value of statistical discrepancy was Tk 3.01 billion in the past fiscal. After finalisation of data, it was reversed at Tk (-) 3.46 billion. While some amount of statistical discrepancy is not at all unlikely, it is the size that is a matter of concern.
Reviewing and questioning economic indicators is integral to economic analysis. And it is the responsibility of the national statistical body to respond to the questions and concerns in order to clarify confusion, if any. Indifference to such queries only triggers more questions.
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