Underperformance marks most macroeconomic parameters

A halfway stocktaking of the execution of Bangladesh's eighth five-year plan (FYP) for development shows underperformance on most macroeconomic parameters, leaving little hope for recuperation during the remaining time.
The midterm review by General Economics Division (GED) has found performance in respect of all the macroeconomic indicators worse than projected during the first three fiscal years (FY) between 2020-21 and 2022-23 of the 8FYP, according to the reassessment report.
"Hope for achieving the failed targets through recovery during the remaining two years of the ongoing 8FYP period fades out amid the internal and external economic shocks," many an analyst says.
And they feel that such economic slowdown poses a setback on way to Bangladesh's graduation into a developed nation by 2041.
According to the GED report, the worst performance was in attracting investments --both private including foreign direct investment (FDI) and public.
The country's projected target to achieve higher FDI-GDP (gross domestic product) ratio looked bleak in each of the past three fiscals, the midterm 8FYP-review report reads.
The FDI-to-GDP ratio was recorded at 0.6 per cent against the target of 0.8 per cent in FY2021, while it was only 0.7 per cent in FY2022 and 0.9 percent in FY2023 against the targeted 1.4 per cent and 1.9 per cent respectively.
Also, the public investment-to-GDP ratio was a bit lower at 23.7 per cent against the target of 24.4 per cent in FY2021.
Although the target was fulfilled in FY2022 with an actual investment-GDP ratio of 24.5 per but it fell behind the target in the last FY2023.
In the last fiscal, the country's private investment-GDP ratio was 23.6 per cent against the 8FYP target of 25.3 per cent, the GED review report says.
Similarly, the government target of enhancing public investment in proportion to GDP was not achieved as the actual government investment was recorded at 7.3 per cent in FY2021, some 7.5 per cent in FY2022 and 7.6 per cent in last FY2023 against the target of 8.2 per cent, 8.2 per cent and 8.7 per cent in the respective fiscals.
On the much-talked-about tax-GDP ratio the performance trailed far off the target in the first three years of the plan period.
In the first FY (2021), the actual tax-to-GDP ratio was recorded at 9.3 per cent against the target of 10.2 per cent. In the subsequent two fiscals also performances were shown below par as the ratio was 8.3 per cent in FY2022 and 8.6 per cent in FY2023 against the targets of 11.1 per cent and 12 per cent.
Policy Exchange of Bangladesh Chairman and CEO Dr Masrur Reaz says during this 8th FYP, Bangladesh might have faced maximum shocks from Covid pandemic, Russia-Ukraine war, higher energy prices, and other internal and external factors.
"In recent days, the price shocks and inflation have affected Bangladesh's economy. Some new poor have been created. So the economy has been under stress," he told the FE about the headwinds that buffeted FYP progress.
Mr Masrur notes that the global demand has started picking up after the Covid shocks.
Meanwhile, the economist says, government efforts have failed to manage the foreign-exchange policy, balance of payments (BoP), inflationary pressure and other macroeconomic fundamentals.
At the same time, the local demand has dropped, public-finance growth got affected, which ultimately impinged on development as well as economic growth, resulting in the missing of the targets in the 8FYP, he adds.
"In the remaining two fiscals--FY2024 and FY2025--recovery will be very tough. So, the government should not run behind the theme of GDP and per-capita-income improvements. Rather, it should work on setting up solid and stable macroeconomic fundamentals. Then in the 9th FYP, it should go for taking up economic growth-enhancing strategy," Mr Masrur suggests.
Under the strategy of vision 2041, the Bangladesh government is now implementing the 8FYP aimed at higher growth toward achieving the target of becoming a developed nation by 2041.
The government's next five-year development-plan period will be FY2026 to FY2030.

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