Encouraging growth in a low-growth world

As Europe is smarting from recession, the world economy is stuck in a low-growth trap. This is apparent from the kind of growth recorded by the developed economies over the last decade and a half. The central fact about this slow growth is that economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth. Bangladesh, like a few other poorer economies, presents a contrasting picture where annual gross domestic product (GDP) growth rate is continuously climbing to higher levels. This has been possible due mainly to policy selection by the policymakers of the country as has been discussed later in this write-up.
Coming back to slow growth in advanced economies, like most things in economics, the slow growth of global economy also boils down to supply and demand: the ability of the global economy to produce goods and services, and the desire of consumers and businesses to buy them. What is worrisome is that weakness in global supply and demand seems to be pushing each other in a vicious circle.
This slow growth in the global economy is not something new, rather it has been so for last 15 years. In the US, where per capita GDP rose by an average of 2.2 per cent annually from 1947 through 2000, it came down and averaged less than 1.0 per cent since 2001. The United States however is steadying the situation by adding jobs at a healthy rate despite a continuing trend of lower growth, both in the US and in other advanced economies. This trend helps explain why incomes have risen so slowly since the turn of the century. It is because of the cheap petrol put in the car and the ultra-low interest rates on savings.
What seems increasingly apparent is that something fundamental in the global growth machine has broken down and can not be fixed by the usual menu of policies, like interest rate cuts and modest fiscal stimulus. Analyzing arithmetically, the slowing down process of growth machine has two potential components. Firstly, people are working fewer hours, and secondly, less economic output is being produced for each hour of labour. Both these factors have contributed to the economy's underperformance.
In contrast to the phenomenon of low growth in advanced economies, the market-based economy of Bangladesh and some other poorer economies are showing better signs of growth. Bangladesh, the 44th largest economy in the world in nominal terms, and 32nd largest in terms of purchasing power, is classified among the Next Eleven emerging market economies as per projections by the relevant international agencies. According to such agencies, Bangladesh's economy is the second fastest growing major economy of 2016, with a growth rate of 7.1 per cent.
Bangladesh, driven mainly by its exports of ready made garments, foreign remittances by NRBs and the domestic agricultural sector, registered a steady growth of around 6.5 per cent in the decade since 2004. The country has been able to do so by pursuing the policy of export-oriented industrialization, with key emphasis on textiles, shipbuilding, fish and seafood, jute and leather goods. The pharmaceutical, steel and food processing sectors have also developed over the years. The telecommunication industry has also witnessed phenomenal growth over the years, with high investment from foreign companies. Bangladesh also has substantial reserves of natural gas and is Asia's seventh largest gas producer and it also has large deposits of limestone. Offshore exploration activities are gathering momentum in the Bay of Bengal. The government promotes the Digital Bangladesh scheme as part of its efforts to develop the country's growing information technology sector.
Furthermore, Bangladesh is strategically important for the economies of Northeast India, Nepal and Bhutan, as its seaports provide vital maritime access for these landlocked regions and countries. China also considers Bangladesh as a potential gateway for its landlocked southwest, including Tibet, Sichuan and Yunnan.
All these factors combined have made it possible for Bangladesh to maintain a consistent rate of growth over the last decade and a half. Bangladesh is also playing an active role in the international forums like the Commonwealth of Nations, D-8 Organization for Economic Cooperation, the South Asian Association for Regional Cooperation, the International Monetary Fund, the World Bank, the World Trade Organization and the Asian Infrastructure Investment Bank. The economy of the country, however, is still reeling under infrastructure weaknesses, insufficient power and gas supplies, bureaucratic corruption, political instability, natural calamities and a dearth of skilled manpower. Slower productivity growth and rising inequality pose further challenges.
As the poorer economies stand on a stronger footing due to growth-driven policy decisions, the global economy will similarly require more coordinated and comprehensive use of fiscal, monetary and structural policies to move to a higher growth path and a comprehensive action plan is urgently required to ensure that it jerks off this disappointing growth trend and propel the economies to higher levels. Weak trade growth, sluggish investment, subdued wages and slower activity in key emerging markets will all contribute to modest global GDP growth of 3.0 per cent in 2016 which was actually the same in 2015, as revealed by IMF World Economic Outlook (WEO) reports. According to IMF World Economic Outlook, global recovery is expected to rise to only to 3.3 per cent in 2017.
Among the major advanced economies, the moderate recovery will continue in the United States, which is projected to grow by 1.8 per cent in 2016 and 2.2 per cent in 2017. The euro area will improve slowly with growth of 1.6 per cent in 2016 and 1.7 per cent in 2017. In Japan, however, the growth is projected at as low as 0.7 per cent in 2016 and 0.4 per cent in 2017. The 34-country Organization for Economic Co-operation and Development (OECD) is projected to grow by 1.8 per cent in 2016 and 2.1 per cent in 2017, according to the WEO.  
While rebalancing continues in China, growth is expected to drift lower to 6.5 per cent in 2016 and 6.2 per cent in 2017, supported by demand stimulus. India's growth rates are expected to hover near 7.5 per cent this year and next, but many emerging market economies continue to lose momentum. The deep recessions in Russia and Brazil will persist and growth rate in Brazil is expected to contract by 4.3 per cent in 2016 and 1.7 per cent in 2017.
The World Economic Outlook argues that reliance on monetary policy alone cannot deliver satisfactory growth and additional easing of monetary policies could prove to be less effective, and even counterproductive in some cases. Many countries have the scope to resort to revise fiscal policies to strengthen activity via public investment, especially as low long-term interest rates have effectively increased fiscal space. Almost all countries have scope to reallocate public spending towards more growth-oriented projects and undertake collective action plan across economies, public investment in projects with a high growth impact would boost demand and improve fiscal sustainability.
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