Lingering turmoil to take toll on economy

If the ongoing political deadlock lingers on in the country, the gross domestic product (GDP) growth will slow down to around 4.0 per cent in the current fiscal year (FY), says the international consulting firm Oxford Analytica.
The firm also made observations on many other political and economic aspects including Awami League's possible stubbornness to remain in power until domestic pressure becomes irresistible and a more potential role of business groups, especially readymade garment leaders, than the civil society leaders to succeed in brokering a compromise.
"Sporadic, low level violence will cause losses for local and foreign businesses, especially in the transportation sector, while the overall investment climate deteriorates due to stalled administrative and economic reforms and GDP growth slows to around 4 per cent in the July 2014-June 2015 fiscal year," said the report of the firm. It was released last week for a limited number of academics and specialists around the world.
However, Professor Mustafizur Rahman, Executive Director of the Centre for Policy Dialogue (CPD), a local think tank, disagreed on the estimate of 4.0 per cent growth. But he agreed that the growth would slow down in the current fiscal.
Commenting on the report, Professor Mustafizur Rahman said the growth would not be that low. It might hover around 6.0 per cent as the economy would adjust itself to the situation gradually.
"No doubt Bangladesh will lag behind on the potential frontier but everything depends on how long the deadlock continues," he also opined.
The government set the GDP growth target for the fiscal 2014-15 at 7.3 per cent expecting an increased flow of investments, exports and remittance as well as favourable weather and political stability.
But most of the local and international agencies predicted the growth rate would hover around 6.0 per cent.
The Oxford Analytica report says the political deadlock will likely continue in the coming months, but protests will become less intense as the government crackdown intensifies.
"Business and labour organisations from a range of sectors have organised rallies and public meetings calling on the two parties to negotiate. Bus companies, particularly affected by the transport blockade, have organised counter-demonstrations. These have been small, and had little effect."
It predicts if the conflict confinues, a resolution is most likely to be brokered by business leaders, with garment industry leaders probably emerging as the most effective intermediaries.
"So long as this violent standoff continues, economic activity will continue but not grow strongly," it says.  
The report forecasts government-backed export sectors (particularly readymade garments) will continue to grow slowly. However, progress in developing new export markets will be stunted.
Remittances will continue to rise, funding domestic consumption. Since remittance-financed economic activity is dispersed in districts outside Dhaka, the damage to the economy in these areas is likely to be limited.
The government's increasingly entrenched and defensive position will make it even less amenable to internal and external pressure for reform, thereby deterring foreign investment through 2015.
Political turmoil intensified on January 03 this year following a wave of protests by the BNP to mark a year since the AL was 'elected' in a general election boycotted by all major opposition parties, including the BNP.
The BNP's main demand is fresh elections under a neutral administration.
Ties with Washington have been poor for some time, the White House repeatedly calling for cross party dialogue, the report said.
However, Sheikh Hasina believes the US administration is seeking to oust her in order to create an NGO-led pliant government; US statements critical of January 2014's elections were vigorously condemned. There is little scope for improvement in US Bangladesh ties this year, according to the report.
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