Bangladesh economy will grow slow by 6.8 per cent in the ongoing fiscal year of 2016-17 mainly due to weaker private and government consumption growth than the country achieved in the last fiscal year, the World Bank said on Monday.
The WB also identified security issue as one of the main risks for the economy in the year.
It said that the money supposed to be invested in the country was being siphoned off out of the country.
The government estimated gross domestic product or GDP growth at 7.05 per cent for the last FY 2015-2016.
The WB projection is also 0.4 percentage points lower than the government’s target of achieving GDP growth at 7.2 per cent in the FY 17.
The multilateral lending agency also projected the economic growth would slow down further at 6.2 per cent in next FY 2017-18 driven by slower consumption growth in both public and private sectors as well as somewhat slower private investment growth.
The WB made the projection in its latest Bangladesh Development Update for October, 2016 released on the day at a press briefing held at its Dhaka office.
Zahid Hussain, lead economist of the WB and author of the report, said that Bangladesh economic growth was better than most of the developing countries but it is still below the country’s 8 per cent aspiration.
He said that the economy would remain stable but some risks, mostly domestic, will also prevail in the year.
Security, financial and trade shocks are the main risks, he said.
‘Security shocks have the potential to cause damage to the economy, particularly impacting investment and consumer confidence,’ he said.
Continued weakness of the state-owned banks could undermine the growth prospects and affect fiscal sustainability, he added.
There are also some external risks including weaker than expected global trade and remittances inflows, he added.
The WB suggested the government for ensuring macroeconomic stability, bringing policy reforms in financial and energy sectors, increasing investment in infrastructure, productivity and human resources development for achieving sustained and faster economic growth in coming years.
Recapitalisation is not enough for state-owned banks, bringing reforms is a must, the report said.
The government’s estimation of 7.05 per cent GDP growth was driven mainly by growth in industry, service sector and rebounded export.
But private investment declined to a three-year low of 21.8 per cent of GDP, it said.
Zahid said that the gap between the actual and the required private investment rate is widening.
It is not lack of money as the national savings rate of 30.3 per cent is higher than the national investment rate of 29.4 per cent, he said.
The money which is supposed to be invested is either being used to boost reserve or being siphoned off out of the country, he said.
He said that there were lack of adequate infrastructure, institutional capacity and competitiveness and problems in the state of doing business, he said.
WB country director for Bangladesh Qimiao Fan was also present at the briefing.
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