Rising income gap, unsatisfactory rate of job creation, inefficient resources distribution, stagnation in the ratio of private investment to gross domestic product and growing capital flight, slowdown in exports and price hike were main weaknesses the country faced on the economic front in the outgoing calendar year, according to Unnayan Onneshan.
It said the government’s growth narrative contradicts the state of people’s standard of living.
The year-end assessment of Bangladesh economy by UO, released on Saturday, said that the economic growth hid in the shadows of poverty while inequality and unemployment were growing, fiscal management was in disarray and price hike put poor in hot water in 2017.
Inefficient distribution of resources and stagnation in the ratio of private investment to gross domestic product are the other major challenges the country faced during the outgoing year.
Stagnant savings and investment together with illicit capital flow arrested productive capacity, it added.
The UO said the annual average reduction in overall poverty as measured by upper poverty line fell to 1.2 percentage points in 2010-2016 from 1.7 percentage points in 2005-10 and increase in Gini coefficient of income distribution to its highest ever level of 0.483 in 2016 signals the ominous state of rising income inequality in the country.
The rate of unemployment in the country, particularly youth unemployment, has been rising at a significant rate.
Recent estimate from the World Bank suggests that annual rate of growth in employment was 3.1 per cent between 2003 and 2010, whereas employment growth declined to 1.8 per cent per annum during the period between 2011 and 2016, questioning the effectiveness of accelerated economic growth, said the UO.
The UO calculated that the total collection of revenue might fall short of the target by Tk 38,900 crore in the end of the current fiscal year to be concluded in June as tax revenue in the first four months of 2017-18 stood at Tk 58,897.49 crore against the four months’ target of Tk 65,458.58 crore, demonstrating 10.02 per cent shortfall.
The UO was critical about the government’s role against arresting food price hike with the average food inflation rising to 6.89 per cent in October.
Such increase in price in the commodity market coupled with reduced production of food grains affected majority people against the backdrop of stagnant savings, and illicit capital flow, said the UO.
The OU noted that the stagnation in the ratio of private investment to gross domestic product and ever increasing trend of the capital flight, coupled with regulatory unpredictability in economic management appeared to pose serious challenge to overall economic performance in the new year.
It also noted that agriculture sector grew by 5.50 per cent in FY 2005-06, and subsequently declined to 4.46 per cent in FY 2010-11 and 3.40 per cent in FY 2016-17 while industrial growth remained stagnant at 9.80 per cent in FY 2005-06, 9.02 per cent in FY 2010-11, and 10.50 per cent in FY 2016-17.
The UO said decreased income from remittance, slow growth of export of manpower and growing deficit in service and trade balance would impede the rate of growth of the economy.
The current account balance exhibited a surplus of $539 million in the first quarter of FY 2016-17, whereas the balance experiences a deficit of $1,791 million in the first quarter of FY 2017-18, it said.
The UO suggested that a medium-term strategy should be adopted immediately by the government to overcome the weaknesses in the new year.
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