Fixing next growth rate in quandary after current GDP-target failure

Less-than-expected economic growth in the outgoing fiscal year has thrown finance officials, who are now preparing a contractionary budget, in dilemmas over fixing next GDP-growth target.
Bangladesh Bureau of Statistics (BBS) Monday released provisional data of gross domestic product (GDP) for the fiscal year 2023-24 to be 5.82 per cent in the end, much lesser than the targeted 7.5 per cent in the original budget and also lower than the revised target of 6.5 per cent.
The growth rate is close to the forecast made by the International Monetary Fund (IMF) at 5.7 per cent and World Bank's projection of 5.6 per cent.
The BBS's growth projection has stunned the Finance Division officials who are now almost at the final stage in budget preparation for the next fiscal year.
Finance officials told the FE that they were expecting that GDP growth for the current fiscal year would come to the revised target or at least close to the target.
However, the achievement is found to be far below the expectation.
A senior finance official said as suggested by economists and development partners, the government is preparing a contractionary budget for the next fiscal year and thus initially set a GDP-growth target at 6.5 per cent.
"But we are now sceptical whether the target is becoming high," he said, even about the conservative estimation in the given economic reality.
With the BBS data in hand, Finance Division officials drafting the budget had a meeting on Tuesday afternoon with the finance secretary to review the GDP-growth projection for the next fiscal year, sources said.
The meeting, sources said, discussed various probabilities, a turnaround of global economy in the coming months, and possibility of higher revenue mobilisation, among others, but could not decide whether or not to change the growth target.
Sources said finance officials would place the issue before the finance minister soon for his decision.
Contacted Wednesday, Dr Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said achieving the growth target would depend on success in removing the constraints by taking appropriate measures.
Growth in manufacturing, construction, agriculture, and services sectors has slowed down while energy growth has gone in to the negative territory, which has been impacting other sectors, he noted.
Moreover, private investment in proportion to the GDP has also fallen, which is also a barrier for GDP to grow.
"Unless energy production is increased, inflation contained, problem over forex reserves can be solved, and import can be increased, achieving 6.5-percent GDP growth next year will also remain impossible," he said.
Mr Hussain thinks that governmental failure to remain strict in policy implementation is behind the failure to lessen macroeconomic instability.
"You are saying one but doing another," he said, citing the example of failing to strictly implement the crawling-peg system in exchange rate and market-based interest rate.

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