Breaking out of low investment trap biggest immediate challenge, it says
The World Bank on Saturday said Bangladesh must restore political
stability for the sake of its economic growth.
The recent political violence is hampering the country’s investment opportunity and development prospects, said officials of the World Bank Dhaka office during a briefing on the Bangladesh development update.
The WB officials also said that restoration of political stability in Bangladesh was a precondition for the country in moving forward through policy and institutional reforms.
‘As we have seen in the last one and a half months, the country is facing immense risks to development for street violence,’ WB chief economist Zahid Hossain said.
He said, ‘It has become vital to restore political stability in Bangladesh.’
The acting director of the World Bank Dhaka office, Salman Zaidi, and other senior officials were present in the briefing.
The WB in its Bangladesh update said the expected gross domestic products in 2013 might stand at 5.8 per cent, much lower than the 7.2-per cent projected by the government for the current year.
It said that GDP growth could be lower due to six internal and external risks including political complexity and violence, possible backlash from the recent compliance and labour safety issues and uncertainties about reopening of traditional migrant labour markets.
Some indirect factors like lack of growth pick-up in agriculture, slower manufacturing growth due to weak exports, domestic demand, and disruption to services for street unrest, gas shortage and slow infrastructure improvement are also decelerating the growth prospects, it said.
Despite having an improved remittance inflows, recovery of export, record increase in foreign exchange reserves and growth in service sector, declining trend in import of capital machinery, volatile electricity generation and falling of private credit have put an adverse impact on the economic growth.
The WB, however, said 5.8-per cent GDP growth was still healthy in comparison with other developing nations.
‘But it is not enough to become a middle income country by 2021.’
Bangladesh’s investment has stagnated at 25.2 per cent of GDP. But by the Asian norms, Bangladesh investment rate should be 31.4 per cent of GDP, which means the country is suffering an investment gap by 6.2 per cent of GDP. ‘Breaking out of the low investment trap is the biggest immediate challenge for Bangladesh,’ it said.
The country is failing to increase investment due mainly to limited access to services, shortages of land, power and gas, labour market rigidity, gender segregation and red tape.
However, Bangladesh has also potential to capture at least 15 out of 80 million Chinese jobs in the next ten years, it said.
It further noted that if the stability in the global commodity prices, functioning domestic supply chain and monetary caution stay on the right track, the rate of inflation could be 7.5 per cent as per budgetary target.
Inflation has fallen from 11 per cent in February 2012 to 8 per cent in March 2013.
In reply to a question, Salman Zaidi said that the government had requested to shift cancelled $1.2 billion funds for the proposed Padma Bridge project to other projects.
But, it depends on the higher authorities of the World Bank in Washington whether the request is to be considered, he said.
-With New Age input
