Uncertainty impairs growth momentum

The country's political imbroglio is yet to ease off, to any tangible extent. There is still no sign of accommodation between the ruling party and the 20-party opposition alliance -- the two 'major players' in its troubled polity. Against this backdrop, one wonders what this protracted trouble will otherwise entail for the future of Bangladesh and its economy.
A high functionary of the UK's Department for International Development (DFID) said in the city this week it is 'very distressing' for "foreign friends of Bangladesh" to see what is happening here. He was visibly disappointed at its current level of unrest.
There is no denying that the country's future growth momentum is now at a great risk. Economists have already expressed their doubts over achieving more than 6.3 per cent gross domestic product (GDP) growth in the current fiscal year (FY).
It is not quite an easy task to quantify the economic cost, in a realistic manner, of the overall impact of political violence, particularly in terms of GDP growth performance. But all concerned would certainly agree that a very significant damage, both direct and indirect, has already been caused to its economy. This will leave an adverse impact on its growth momentum as well as image.
It is hardly possible for the country to achieve its projected plus 6.0 per cent economic growth rate, given its present macro- and micro-economic scenarios. The GDP growth rate will not be more than 5.5 per cent in the current FY, some economists have already noted.
The present level of private and public consumption and investments, and net foreign trade position is hardly showing any positive indication about achieving more than 5.5 per cent of GDP growth rate during the current fiscal, if things do not dramatically show an upturn.
Besides, government's revenue income is falling short of the target despite hard efforts by the National Board of Revenue (NBR) to help augment such earnings. Net foreign aid inflow has shown a negative trend, and foreign investment has not come to the expected level. The service and manufacturing sectors have also performed badly due to the turmoil.
The stock market has been in a tailspin over the last few weeks. Investors are largely on a selling binge amid the country's political turmoil. The latter factor has kept the investors worried and sometimes they have gone for panic sale as well.
But there are also a few others who see otherwise a good prospect for an economic rebound in the coming days. Since the world economy is picking up, and the internal political situation has, of late, become normal to some extent, the growth rate of the country's GDP performance, according to such optimists, will not be less than 6.3 per cent. However, they -- the optimists -- do also see some challenges ahead, in achieving the projected growth.
Multilateral lenders and financial institutions like the World Bank (WB), the International Monetary Fund (IMF) and the Asian Development Bank (ADB) have meanwhile projected the country's growth rate at below the 6.0 per cent mark for the current fiscal.
Due to prolonged hartal and blockade programme of the main opposition political alliance, the costs of doing business have gone up by 20 to 30 per cent, and even more in some cases. Rising costs and disruption in supply chain have been hitting the exporters and domestic market players hard.
However, there has been a rise in air shipments, which are four to five times costlier than shipments by sea-borne cargo vessels, during the last two months. This has led to cost escalation. Such a situation is putting additional pressure on exporters and their profit margin is being slashed in the process.
Analysts say if the political situation persists like this for a longer period, it will be well-nigh impossible to recover the losses. Entrepreneurs will then lose their competitiveness further. The burden of economic losses, as the fallouts from the troubled political situation, has, however, fallen mostly on the poor and middle income groups.
Meantime, garment-makers are anticipating a significant drop in work orders from June as retailers are unwilling to travel to Bangladesh under the prevailing circumstances.
Although the internal situation like transportation of goods from factories to port and from the port to the factories has now improved, the retailers are still shying away from the country. Rather, they are calling the garment-makers to a third country like Thailand, Hong Kong or India to hold meetings.
The retailers told a recent meeting in the city that they were not placing the full order volumes, fearing further volatility. In some cases, they are slashing orders by more than 30 per cent and diverting them to Vietnam, Cambodia, India and some other destinations.
Meanwhile, the country's ordinary citizens and the economy are bearing the brunt of the violence, amid persistence of political uncertainties, on real or perceived grounds. People are getting increasingly frustrated with this turmoil.
Analysts have feared that the impact of damage to assets and resources will be greater and last longer, in the event of no abatement of political violence.
A section of economic analysts believes that the immediate impact of the damage on the economy might not otherwise be too severe, as are portrayed by some other stake-holders due to the recent slowing down of the intensity of violence to some extent. Many businessmen have also devised their own ways to cope with the emerging situation.
Yet then, it is true that some damage had already been done to agriculture, manufacturing, transport, tourism and a few other sectors of the economy due to the prolonged political unrest. Estimated losses were stated to be quite substantial. Such losses do need to be recouped for the greater interest of the country.
The government can otherwise help offset the negative impact on the economy by stimulating its investments in big projects and speeding up the works for implementation of development projects in time.
    szkhan@dhaka.net