World Bank on Thursday projected the gross domestic product growth at 7.3 per cent for Bangladesh for the current fiscal year of 2018-19 in stark contrast to the government’s provisional estimate and Asian Development Bank’s forecast.
The Washington-based multilateral lender made the projection in its latest publication titled ‘Bangladesh Development Update, April 2019 Towards Regulatory Predictability’ released in Dhaka on the day.
The government on March 19 put the provisional estimate of GDP growth at record 8.13 per cent for the fiscal year on the back of better performance of the key macroeconomic indicators including investment, export and manufacturing.
In recent years, there had been a significant level of difference — ranging from 0.5 percentage points to 1 percentage points — between the government’s GDP estimation and that of the multilateral lending agencies including WB, International Monetary Fund and ADB.
ADB, however, on Wednesday estimated the country’s GDP growth at 8 per cent, very close to the government’s calculation, for the current fiscal year.
Local economists and experts also expressed their doubts about the government’s estimation saying that there were inconsistencies between the estimation and the actual performance of the economic indicators like private investment.
Replying to a question why there were differences between its GDP growth projection and the government’s estimates and the ADB’s projection, WB lead economist Zahid Hussain, at a press briefing arranged at its Dhaka office to release the report, declined to comment on the issue and said that the question on GDP projection should be placed before the agencies concerned.
‘WB makes its estimation analysing the data on export, import, revenue collection, private and public investment and other economic indicators, and applying its own calculation method,’ he said.
WB said that Bangladesh’s economy would grow at 7.3 per cent driven by industry — manufacturing and construction — and services on the supply side and private consumption and exports on the demand side.
‘Bangladesh is one of the top five fastest growing economies in the world in spite of insufficient private sector investment,’ WB country director for Bangladesh and Nepal Robert Saum said.
Though there are slight variations between some of the official projected growth rates, it is high growth rate considering the current global scenario and WB is happy with it, he said.
According to the WB report, the four other fastest growing economies are Ethiopia (8.8 per cent), Rwanda (7.8 per cent), Bhutan (7.6 per cent) and India (7.5 per cent).
The report said that after a modest performance in last year, export earnings and remittances bounced back helping the rural economy grow faster.
In addition, the country has substantially improved its electricity generation and a bumper agricultural harvest has further stimulated the growth, it said.
Private sector investment, however, remained weak with a decline in import of capital machinery and private sector credit growth, and low rate of foreign direct investment, it said.
Zahid said that a country could achieve GDP growth over 8 per cent in a particular year but it should increase investment-GDP ratio and productivity to sustain it.
High GDP will not sustain without an increase in private sector investment, he said.
Zahid said that macro-economy remained stable but rising non-performing loans, weak revenue mobilisation and eroding price competitiveness in the global market posed as major risks.
He said that there were weakness and vulnerabilities in the financial sector with high rate of NPL, concentration of loans in some few largest borrowers and risks of capital shortfall.
Deficit in overall balance of payment, appreciation in real exchange rate and erosion in price competitiveness in the global market are the risks in the external sector, he said.
Reforms in the financial sector and business regulations, and maintaining macroeconomic stability are needed to sustain the high growth rate, according to the report.
Additional investment in infrastructure and in human capital development will help the country sustain the growth, WB said.
WB also stressed ensuring the autonomy of Bangladesh Bank regarding regulation of the financial sector, increasing risk-based supervision and tightening rescheduling guidelines and stopping ad hoc rescheduling of defaulted loans.
‘Rescheduling is one kind of contagious disease. Repeated chances of rescheduling to some borrowers will spread the disease to comparatively compliant borrowers,’ Zahid said.
He said offering rescheduling facility to wilful defaulters would not bring any positive outcome.
Rescheduling facility may be offered only to businesses who failed to repay loans due to rational causes, he added.
Referring to a WB’s survey on 72 business firms, he said that regulatory predictability was important for investment.
Medium-sized firms bear the brunt due to regulatory unpredictability and inconsistency in policy implementation affecting growth, he said.
WB senior communications officer Mehrin Ahmed Mahbub and other senior officials were present at the briefing.
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