World Bank has retained economic growth projection for Bangladesh at 6.4 per cent for the current fiscal year 2017-2018, much lower than the government’s target, forecasting some risks including slippages relating to upcoming elections and weak tax revenues.
The global lender made the projection in its flagship report titled ‘Global Economic Prospect: Broad-Based Upturn, but for How Long’ released on Wednesday from Washington.
‘Slippages relating to upcoming elections and weak tax revenues in some South Asian countries including Bangladesh could derail fiscal consolidation efforts,’ the report said.
The government in the national budget for FY 2017-2018 had set a target of achieving GDP growth at the rate of 7.4 per cent on the achievement of 7.2 per cent in FY17.
Earlier in June and October last year, WB also said that Bangladesh’s economy would grow by 6.4 per cent in FY2018.
Though the WB did not clearly mention about the slippages relating to upcoming elections, typically in Bangladesh tension prevails between competing political parties causing political unrest and violence affecting economic activities.
National elections, however, might be held in Bangladesh by the end of the calendar year 2018 while FY 2018 will end in June.
World Bank lead economist for Bangladesh Zahid Hussain told New Age that experiences showed that election-related uncertainties like unrest, strikes and violence loomed much earlier of the event in the country.
Normal economic activities are disrupted during the period, he said.
The government high-ups have already said that there would not be any reforms in the election year, he added.
He said that achieving growth at 6.4 per cent would be admirable as still it was the 17th highest growth projection among 134 countries.
Economy of only 17 countries would grow by 6.4 per cent or higher rate in FY18, he said.
World Bank makes the projection assuming that the business would remain as usual in the period, he said, adding that the existing scenario including increased vulnerability in the banking sector and deficiency in infrastructure also did not support the government’s 7.4 per cent growth target.
According to the report, the main risks to the outlook for the South Asian countries including Bangladesh are domestic, including fiscal slippages, setbacks to reforms to resolve corporate and financial sector balance sheet deterioration, disruptions due to natural disasters, persistent security challenges and weakening domestic demand.
High levels of nonperforming loans have been long-standing concerns in some countries including Bangladesh.
As an external risk, an abrupt tightening of global financing conditions or a sudden rise in financial market volatility could set back regional growth, it said.
Setbacks in efforts to resolve these domestic bottlenecks would continue to weigh on investment, and more broadly on medium-term growth prospects in the region, it said.
A protracted slowdown in remittance inflows would weigh on domestic consumption in Bangladesh and Sri Lanka.
According to the report, growth in large commodity importers remained strong in Bangladesh despite some disruptions like floods in Bangladesh.
Elevated credit growth continued to support investment in some countries and current account deficits gradually widened across the region including Bangladesh. Financial sectors continued to weigh on private investment in Bangladesh and India.
Bangladesh’s growth in FY17 was 7.2 per cent, exceeding the June forecast owing to higher-than-expected outturns in the manufacturing and services sectors.
Robust private consumption was complemented by strong public investment growth, it said.
Economy in Bangladesh will grow at an average of 6.7 per cent a year over FY2018-2020, benefitting from strong domestic demand and strengthening exports, the report said.
Low interest rates and improved infrastructure are expected to lift investment. Remittances are expected to rebound due to the growth of firms in Gulf Cooperation Council (GCC) countries and support private consumption, it said.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Miscellany