Estimation of the gross domestic product (GDP) growth may be too optimistic and does not adapt to key macroeconomic indicators, when taking into consideration persistent high inflation, and declining contribution of major sectors into the country’s economy.
The Bangladesh Bureau of Statistics (BBS) had projected GDP growth for the first quarter of FY24 at 6.01 and for the second quarter 3.78 per cent. However on Monday, the bureau estimated 5.82 per cent GDP growth at the end of the current financial year.
Speaking to The Business Post, Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman said, “Compared to the previous two quarters, growth in Q3 and Q4 is expected to be above 6 per cent.
“But the economy is not stress-free now. So it can be said that the number does not add up, and does not correspond to the other macroeconomic indicators.”
Former lead economist of World Bank Dhaka Office Zahid Hussain said, “The BBS has made the growth estimation based on the data of seven months in the current financial year. But the reasons behind the nose diving growth in the second quarter still exist.
The economist continued, “Due to high inflation, purchasing power has declined, while demand in the economy has also decreased. Real wages fell. But how is it possible that household consumption has increased as per the BBS GDP calculation?
“So there is a question about the growth data.”
The BBS data show that the annual percentage change of household final consumption expenditure was 1.98 per cent in FY23, which is estimated to jump 3.33 per cent in FY24.
However the average wage growth rate was over 7 per cent, which was far lower than the inflation. It means the real growth was negative.
Inflation has hovered around 10 per cent for the entire financial year, which was 9.74 per cent in April this year, and the food inflation reached two digits again in that month.
Import restrictions have been made to overcome the USD shortage.
Imports fell by 15.42 per cent compared in July-March of FY24, compared to the same period of FY23, while export growth was only 3.9 per cent in that period of FY24, which was 8.07 per cent in the same period last FY.
The depletion of reserves continues, coming down to $18.42 billion on May 15. Besides, the depreciation of Taka continues as well, and the official exchange rate has recently crossed Tk 117.
Under such circumstances, there are questions about the estimated GDP growth, and Mustafizur Rahman believes that the competitiveness of exports has increased slightly due to the devaluation of the Taka.
On the other hand, remittance income will also increase slightly. Based on these two indicators, the GDP growth cannot increase suddenly compared to the second quarter of FY24.
For the current FY, private sector investment as a proportion of GDP has been estimated at 23.51 per cent, which was 24.18 per cent in the previous FY. The government investment has been estimated at 7.47 per cent in FY24, which was 6.77 per cent in FY23.
In this context, Zahid Hussain said, “This data shows that the country's overall economy is slowing down. Especially, the growth drivers of the economy such as manufacturing, agriculture, construction, service, and the energy sector are showing a negative trend in FY24 compared to FY23.
According to the BBS estimation data, the GDP growth in Agriculture is estimated at 3.21 per cent in FY24, which was 3.37 per cent in FY23. In industry and manufacturing sectors, the GDP growth is estimated at 6.58 per cent in FY24, compared to 8.89 per cent in FY23.
In the energy and power sector, the GDP growth was negative 0.33 per cent in FY24, which was 2.46 per cent positive in FY23. Growth estimated for the transportation and storage sector is 5.24 per cent, which was 5.49 per cent in FY23.
