The state of the Gross Domestic Product (GDP) is no doubt the key indicator to measure the performance of an economy. For the last few months, this is clearly reflected in discussions and discourses on the growth of the economy in the current fiscal 2014-15.
Every year, on the eve of national budget in June, there is noticeable hype on analyses of GDP growth. Local and international organisations unveil their projections on growth rate for the year under review. When the government releases official estimation, usually in May, the debate gets new stimulus. The authenticity of growth rate is questioned by many. Nevertheless, the estimation prepared by the Bangladesh Bureau of Statistics (BBS) is the only official statistics of the national economy. BBS usually finalises the preliminary estimation after several months. In the meantime, everyone simply forgets the growth rate of the year passed.
In the current fiscal, growth rate of GDP has been estimated at 6.51 per cent, which is 0.45 percentage point higher than the growth rate achieved in FY'14. The projected growth rate for the last fiscal year was 6.12 per cent which was later revised and finalised at 6.06 per cent. As mentioned earlier, no one is talking about or questioning the actual growth rate figure of the last year. All are now busy with current year's growth rate.
The 6.51 per cent is well below the government's original target of 7.3 per cent, set in the current year's budget. It was set in line with the target of Seventh Five-Year Plan (7FYP). It was, however, presumed earlier that the growth rate wouldn't touch 7.0 per cent this year. The current growth rate indicates that the economy is not performing according to expectation. But, it needs to be reviewed in a broader time frame.
FAIRLY PERSISTENT: For the last decade, growth trend of Bangladesh appears fairly persistent as there is no volatility or big fluctuation. 10 years' average growth rate is 6.2 per cent while for 14 years, it is 6.0 per cent.
During the period, most of the developing countries have experienced fluctuations in growth. Nigeria posted 8.4 per cent growth in 2010 which dropped to 2.3 per cent in 2011 and jumped again to 11 per cent in 2012. It again declined to 4.1 per cent. Vietnam, considered a better peer for Bangladesh, posted 7.1 per cent growth in 2007 which dropped to 5.7 per cent in 2008 and 5.4 per cent in 2009. It rose to 6.4 per cent in 2010 but continued to drop to 5.4 per cent in 2011 and 5.2 per cent in 2012. In 2013, it rose to 5.4 per cent. During the period, Turkey experienced a negative growth as the economy contracted by 4.8 per cent in 2008.
In the last 10 years, Bangladesh economy had to absorb several external and internal shocks. With the phasing out of multi-fibre arrangement from the first day of 2005 Bangladesh's readymade garments entered quota-free global market. Proving all apprehensions wrong, export of garment continued to surge and supported the country's GDP growth. Devastating cyclone Sidr hit in November, 2007 causing death to more than 3,400 people, colossal damage to 1.3 million homes and 1.7 million livestock in the vast costal areas of the country. Growth rate declined to 6.01 per cent in FY'08 from 7.06 per cent in FY'07. Global oil and food price crisis and global recession originating from global financial crisis in 2008 also left some negative impact on Bangladesh. Cyclone Aila hit in May, 2009. All these, coupled with the cost of holding elections, adversely affected the growth rate. Oil price rise, Arab Spring and crisis in Middle-East and North Africa and Tsunami in Japan also took their toll in 2011. Despite all these shocks, country's growth did not fluctuate like many other developing countries.
Curiously, Bangladesh's growth experience suggests the influence of so-called political business cycle which may conveniently be dubbed 'election-growth cycle'. The country's GDP growth has consistently declined in most previous election years -- 1991, 1996, 2002 and 2009. GDP growth rate declined to 3.3 per cent in FY'91 from 5.0 per cent in FY'90. Same thing happened five years later as growth rate declined to 4.6 per cent in FY'96 from 4.9 per cent in FY'95. The election-growth cycle reappeared another five year later and growth rate dropped to 4.4 per cent in FY'02 from 5.3 per cent in FY'01. Growth again declined to 5.05 per cent in FY'09 from 6.01 per cent in FY'08.
But, the trend takes a break in 2014. Growth rate was 6.01 per cent in FY'13 which increased to 6.06 per cent in FY'14. This reflects a resilient nature of growth.
DISTRIBUTION ASPECT: Resilience of Bangladesh economy is well established which is also reflected in the growth trend. But distribution of growth and its contribution to employment generation are critical areas in need of attention.
Although the Gini coefficient of income distribution, does not adequately reflect the disparity situation, it is very much indicative of income disparity. In fact, Gini co-efficient decreased slightly from 0.467 in 2005 to 0.458 in 2010 but increased from 0.451 in 2010. Usually Gini-index of `0' indicates perfectly equal distribution while '1' shows fully unequal distribution of income (as the index ranged between 0.00 to 1.00). Thus over the decade, income inequality actually increased reflecting more concentration of resources to limited people.
The country's unemployment rate has also declined slightly during the period. Unemployment rate dropped to 4.3 per cent in 2013 from 4.5 per cent in 2010, according to the latest Labour Force Survey of BBS. It also revealed that the country's total unemployed persons stood at 2.58 million in 2013 as against 2.60 million in 2010. Unemployment rate was, however, 4.3 per cent both in 2003 and 2005.
Thus, 6-plus growth rate is not able to absorb 2.58 million job seekers every year. It is also not enough to distribute resources to most of the people. Resilient growth now needs to be raised to higher levels to provide jobs to more people and reduce income disparity through balanced distribution of the growth. This, indeed, is a challenging task.
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