Warns ADB in Asian Development Outlook Update
The Asian Development Bank on Wednesday projected that Bangladesh’s economic growth would decline further to 5.8 per cent in the current fiscal year, 0.2 percentage point lower than its earlier projection, due mainly to political tension ahead of next general elections.
Lower growth in export and slower investment and consumer demand will also play a role in sluggish growth of gross domestic products in the country in FY2013-14, said ADB in its Asian Development Outlook Update-2013.
Earlier, the multilateral lender had projected that the country would attain economic growth at 6 per cent, much lower than the government’s target of 7.2 per cent set for the year.
The ADB also projected that inflation would be at 7.5 per cent, lower than the 7.7 per cent in the previous year.
‘Political tensions in the run up to the elections are building up, which is not helpful for maintaining steady economic activity. Frequent strikes are expected to depress services output,’ ADB country director Teresa Kho told at a press conference organised on the occasion of launching of ADO Update-2013 at its office.
‘We expect export growth to be lower than assumed earlier. Consumer and investment demand will also be weaker,’ she said.
She said that agriculture sector growth, if weather remain in right track, is expected to rise to 3.3 per cent from 2.2 per cent in the FY 2012-13 but industry growth is expected to slow to 8.2 per cent from 9 per cent in last year because of weaker external and domestic demand.
ADB’s principal country economist Mohammad Zahid Hossain also termed the political uncertainty as the major challenge in attaining growth.
‘The run up to parliamentary elections will challenge macroeconomic stability as frequent strikes disrupt economic activity and political uncertainty prompts consumers and investors to adopt a more cautious approach to spending,’ he said.
Tax collection may also suffer because of disruption caused by political unrest, he added.
In reply to a question, Zahid said that political stability is absolutely essential. We hope that the political stability will prevail so that the economy can function as Bangladesh has tremendous opportunities to get middle-income country status before the timeline.
He said investment in infrastructure and skill development and regulatory reforms were the three major challenges the country needs to address.
He said that since election was approaching nearer the rate of implementation
of annual development programme might increase. On the other hand, possible political unrest may hamper in ADP implementation.
The ADB also identified some risks to their projections.
It said that revenue collection and foreign financing could fall short and political pressures might scuttle planned increases in fuel and electricity prices to reduce subsidy.
‘Fiscal management could be undermined, inducing higher bank borrowing that would break monetary discipline,’ it said.
ADB has appreciated the initiatives taken by the leading global brands and other stakeholders to improve labour safety in the readymade garment sector.
‘These are positive initiatives. We hope these initiatives will bring benefit for the sector and stakeholders,’ Zahid said.
Teresa Kho said, ‘To grow rapidly, Bangladesh needs to attach higher priority to enhancing its business climate, improve infrastructure and trade logistics and address skills shortages.’
Bangladesh needs to shore up investment on an accelerated basis and diversify its sources of growth, she said.
Replying to a question on GSP suspension by the USA for Bangladeshi products in its market, Teresa Kho denied to answer saying that this is a bilateral matter between the U.S. and Bangladesh.
-With New Age input
