Home ›› 09 Mar 2022 ›› Editorial
Bangladesh is one of the ten ‘emerging economies’ of the world and is poised to become a $500b economy by the next fiscal year. As per the government’s projection, the size of the Bangladesh economy would be $510 billion in fiscal 2022-23. GDP is estimated to be $455 billion at the current price this fiscal year, up from $411 billion in the previous one. The overall growth will reach 12.08 per cent, according to the forecast, which was presented at the Fiscal Coordination Council meeting presided over by Finance Minister.
The production of crops, especially Aman and Boro, continued to grow like in the previous years. In fiscal 2019-20, crop production was 430.35 lakh tonnes. Crop production will increase 9.7 percent year-on-year to 472 lakh tonne in fiscal 2021-22, according to the Department of Agricultural Extension.
On the other hand, the overall production of medium and large industries saw a 19 per cent growth in August 2021. The growth rate was 4.38 per cent in the last year. Among others, the leather industry witnessed a giant 125.24 per cent growth while the textile saw a growth of 29 per cent and other non-metallic minerals 30.72 per cent.
According to the survey, Present Business Status Index (PBSI) (year) and PBSI (quarter) pointed to an improvement in business activities in October-December 2021 quarter in comparison to July-September 2021 quarter. Compared year-on-year, RMG, textile, restaurant, food processing, and pharmaceutical sectors have registered a comparatively faster recovery. Regarding the BCI, heavy and export-oriented firms, 57 per cent and 56 per cent respectively, have higher business confidence (BCI) compared to the MSMEs (54 per cent-55 per cent) and non-exporter firms (54 per cent) respectively.
The South Asian Network on Economic Modeling (SANEM) also revealed that the overall business confidence in January-March 2022 may face a decline in comparison to the last quarter as most of the sectors have expressed growing concern about the advent of Omicron while presenting the findings from the seventh round of the “Business Confidence Index” survey. But, the Covid 19 infection rate came down below 5 per cent on 26h February 26, 2022 and the lowest in the last 8 weeks.
According to provisional estimates of Bangladesh Bureau of Statistics (BBS), per capita GDP and per capita national income stood respectively at US$ 2,097 and US$ 2,227 in FY 2020-21. The domestic savings stood at 24.17 per cent of GDP, and national savings stood at 30.39 per cent of GDP for the same period. The gross investment stood at 29.92 percent of GDP in FY 2019-20 where public investment and private investment accounted for 8.67 per cent and 21.25 per cent of GDP, respectively.
In FY 2019-20, the inflation rate was 5.65 per cent. Of this, the food inflation was 5.56 per cent and non food inflation stood at 5.85 per cent. The inflation rate for FY 2020-21 was 5.4 per cent. But the actual inflation rate reached 5.56 per cent which was slightly higher than the estimate.
The Centre for Economics and Business Research (CEBR) disclosed the findings in its annual World Economic League Table (WELT 2022) report, stating that Bangladesh has been among the world's fastest growing economies over the last decade. In the report, the Bangladesh government's efforts to maintain a low debt-to-GDP ratio and operate a fiscal deficit of 5.9 per cent in FY21 were mentioned in glowing terms.
The economy is projected to grow at 6.8 per cent for the fiscal year 2022, according to the latest Asian Development Outlook (ADO) 2021 released by the Asian Development Bank (ADB). The main risk is re-escalation of the Covid-19 pandemic in Bangladesh or other advanced economies adversely affecting the external demand, said the ADB report. The growth projection reflects a strong recovery supported by strengthening manufacturing, continued expansion in the world economy and effective government recovery policies. The report noted that in FY 2022, improving consumer confidence and the stimulus measures of the government are expected to boost private and public investment. Strong remittances will stimulate private consumption, notes the ADB report.
The economy might face multiple hurdles while achieving a medium to long term outlook as it is yet to diversify exports beyond RMG, incorporate sustainable production processes for zero net emissions, and address infrastructural gaps for reducing disparities across geographical regions.
Bangladesh saw its goods trade deficit widen to record levels on strong domestic demand and rising energy prices, said the WB, adding that private consumption, the main engine of growth, supported by rising services activity and increased exports of readymade garments improved the outlook for Bangladesh.
According to the BBS, 85.1 per cent of the employed population in Bangladesh works in the informal sector, which is unregulated and offers no legal protections. The pandemic has devastated the informal sector, affecting in particular those who are employed in the non-agricultural informal sectors. Poverty has risen considerably as a result of the pandemic, increasing from 20.5 per cent in the last fiscal year to 29.5 per cent in August 2021. SANEM has forecasted an increase to 40.9 per cent, and the Bangladesh Institute of Development Studies (BIDS) expects an additional 16.4 million people to be pushed into poverty as a result of the pandemic. Inadequate social security networks have accelerated the phenomenon.
According to World Population Review, Bangladesh’s Gini coefficient is 0.678. The human inequality coefficient for Bangladesh is 23.4 per cent, pointing to general inequality that persists within the country.
Market competition in Bangladesh functions under a weak institutional framework. The Competition Act of 2012 seeks to prevent companies from abusing their dominant position in the market to determine prices. However, it lacks skilled human resources and legal powers to investigate and curtail monopoly and dominant market power.
According to the World Bank’s Doing Business 2020 Report, it takes nine procedures and 19.5 days and costs 8.7 per cent of per capita GNI to start a business in Bangladesh.
The workers employed in the informal sector were hit the hardest by the lockdowns. Furthermore, the Cottage, Micro, Small and Medium Enterprises (CMSME) sector also faced a grave crisis as they usually do not have access to capital and savings to survive in the Covid-19 pandemic situation. According to a survey by the Centre for Policy Dialogue (CPD), 41.4 per cent of the women-led MSMEs had to completely shut down, 7.1 per cent had to reduce office space, and 2.9 per cent had to relocate to a cheaper place.
The recent fuel price hike, rising price of essential commodities, freight cost of ships in international routes are responsible for the recent price hike in the local market. The impact of the fuel price hike has also been significant and 97 per cent of the firms reported an increase in transportation cost and 79 per cent of the firms reported an increase in energy cost.
A senior BBS official told the media that since the Consumer Price Index of the non-food items had been surging over the years, the overall inflation had also been showing a higher trend over the last three months. The expenses for house rents, clothing and footwear, fuel and lighting, furniture, house equipment and some other products have increased.
According to CPD, the presence of excess liquidity in unproductive sectors will induce higher inflation in the economy, raising the prices of essential commodities creating hardship for the poor and vulnerable non-poor population.
The International Monetary Fund (IMF) has forecast the headline consumer price index (CPI) inflation in Bangladesh to rise to 5.9 per cent in FY22, driven by higher international commodity prices. The impact of Russia- Ukraine was already felt throughout the world and Bangladesh is not out of risk.
The World Bank Group President said "The world economy is simultaneously facing Covid-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries," Bangladesh is not an exception.
The writer is a legal economist. He can be contacted at mssiddiqui2035@gmail.com
