The World Bank (WB) projected Tuesday the country's Gross Domestic Product (GDP) rate to be 6.2 per cent during the current fiscal year.
It said attainment of the government-targetted 7.3 per cent economic growth could not be possible unless an 'investment boom' takes place.
"Bangladesh's gross domestic product (GDP) growth can be 6.2 per cent in the current financial year. But it is not possible to reach the trajectory of 7.0 per cent growth with only 28.7 per cent investment-GDP ratio," said WB's lead economist Zahid Hussain while releasing the Bank's Bangladesh Development Update Tuesday in Dhaka.
The WB's projection for the current financial year (FY) 2014-15 is 1.1 percentage points lower than the government's forecast of a 7.3 per cent growth.
"The FY15 budget has set a very ambitious 7.3 per cent growth target. Achieving this will require the total investment-to-GDP ratio to rise by over 5.0 percentage points-from 28.7 per cent in FY14 to 33.8 per cent. This cannot happen without a major rise in private investment rate," Mr Hussain said.
The WB economist said Bangladesh could achieve 8.0 per cent economic growth within the next five years if the special economic zones (SEZs) are made investment friendly and major infrastructure projects like Dhaka-Chittagong 4-lane and expressway are implemented shortly and two proposed larger power plants at Bibiayana are set up.
About the Bank's 6.2 per cent economic growth projection in the current FY2015, he said political stability since early January, signs of an uptick in remittance inflows from last year's near 2.0 per cent decline, continued strength in exports if compliance reforms are speedily implemented as well as buoyant consumption demand relative to last year, bode well for growth.
Outlining some risks, the WB development update said macroeconomic stability, better governance in banking system, development of markets for long-term finance, further trade liberalisation, and stronger attention to efficient implementation of infrastructure investments with necessary institutional changes relating to regulation and policy formulation remain key factors in this process.
"Moving forward, stronger attention is needed to swiftly complete the transition in garments, finish the critical ongoing road development projects, enact the Public-Private Partnership (PPP) law and award contracts for building SEZs," the report added.
The development update said there is also a need to focus on speedy completion of transformational ongoing projects in the road and energy sectors, particularly the Dhaka-Chittagong and Dhaka-Mymensingh highway, double tracking of Dhaka-Chittagong Railway, the Padma Bridge, the Dhaka metro rail and the two Bibiyana gas field-based large power plants.
"The government should prioritise the most transformative projects and provide all necessary resources for completion within a specified timeline," the report said.
The WB economist warned that political unrest could depress private investment, push up inflation and put reserve under pressure.
"Lack of progress in compliance in garment factories could trigger loss of preferential access to the EU market. Inability to reopen job market in the Middle East, and deterioration of the state-owned banks' financial solvency could challenge fiscal sustainability," he said.
So, speedier progress needs to be made to improve financial sector governance, remediation of garments, liberalisation of exchange regulations and infrastructure management, he said.
About inflation, Mr Hussain said the Bangladesh Bank's target of 6.5 per cent inflation in the current fiscal is so far on track.
The WB's development update projected 7.0 per cent inflation in the current fiscal.
The development update suggested more investment for developing the infrastructure saying investment in this sector is considerably lower than 7.0 to 10 per cent needed annually for next 10 years.
Mr Hussain said Bangladesh has achieved 6.1 per cent GDP growth which is good but below the potentials of the country.
He said: "Private consumption ratio to GDP declined by about 1.5 percentage points, private investment fell by 0.36 percentage points and national savings rate stagnated at 30.5 per cent, still 1.85 percentage points higher than the domestic investment rate."
The WB's development update has praised Bangladesh's graduation in the Human Development Index (HDI) 2013 from Low Human Development (LHD) category to Medium Human Development (MHD) category.
About the financial sector, the Bank's update said credit and risk management status is unsatisfactory in the banking sector. "There has been a steady rise in non-performing loans (NPLs) to 10.75 per cent in June 2014, up from 10.5 per cent in March 2014 and 6.1 per cent in December 2011."
"Weak corporate governance, especially in state-owned banks, has led to sub-optimal lending decisions…… Bangladesh Bank's supervisory and regulatory capacity is still weak -compliance based instead of risk based- and this needs to be strengthened to improve efficiency and stability of the banking sector," it said.
It said the overall FY2015 budget deficit target is prudent (less than 5.0 per cent of GDP), notwithstanding somewhat ambitious revenue targets.
"The revenue-to-GDP ratio is projected to increase by over 1.0 percentage point. This is not beyond the realm of possibility since such an increase was achieved in FY11, but it has been rather rare," the WB report said.
World Bank country director Johannes Zutt at the report- launching ceremony Tuesday said Bangladesh needs to invest more in the infrastructure development to achieve the targetted growth for graduating as a middle-income country.
kabirhumayan10@gmail.com
© 2026 - All Rights with The Financial Express
