Political jitters to slow economic growth

WB forecasts 5.7pc GDP growth for current fiscal year

Star Business Report

The World Bank forecasts Bangladesh's GDP growth to be around 5.7 percent this fiscal year, well below the government's target of 7.2 percent, due to political unrest, image crisis of the garment sector and slow remittance growth.
The projection came in the multilateral lender's latest edition of the Global Economic Prospectus, which was released on Tuesday.
The report predicts South Asia's regional GDP growth to come to 5.7 percent this year and developing countries' 5.3 percent.
“The projected growth [of 5.7 percent] is not bad seeing that Bangladesh's peer countries are expected to grow at the same rate or less this year. And not to forget the present context,” Zahid Hussain, lead economist of World Bank's Dhaka office, told The Daily Star. The GDP growth last fiscal year stood at 6.03 percent.
Hassan Zaman, chief economist of Bangladesh Bank, told The Daily Star yesterday that the World Bank's growth forecast “looks reasonable”, as the central bank's most recent growth projection for fiscal 2013-14 ranges between 5.7 percent and 6.0 percent.
However, the report said the risks to the outlook for Bangladesh are tilted to the downside, on balance. “Political uncertainties related to national election in Bangladesh ... could hamper a sustained revival of business confidence and investment,” it said. Hussain further said the national election this year was “not normal”, so risks of resurgence of political turmoil remains. “The losing party normally refrains from holding further demonstrations following national elections even if they hold grudges about the fairness of the polls. But this time is different.”
Another challenge to achieving the projected GDP growth comes by way of the image crisis of the country's main export sector, the garment sector, owing to the twin industrial disasters of Rana Plaza collapse and Tazreen fire, the WB economist said. “The political turmoil, which surfaced few months later, made things worse for the sector.”
Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association, expects the full impact to be felt in February or March's figures.
Since October the country has lost around 50 working days due to shutdowns and blockades, which directly affected the small and medium industries and transport sectors. “This loss cannot be made up, so growth is bound to be lower than in the previous year.”
Moreover, remittance, one of the driving forces of the economy in recent years, has been showing signs of a slowdown of late. It will curb the purchasing power of the lower income group, which will, in turn, reduce the demand for locally-produced goods like soap, lungi and television sets. “This will affect GDP growth.”
Meanwhile, the report projected the global GDP growth to accelerate from 2.4 percent in 2013 to 3.2 percent this year.
“Five years after the global financial crisis, the world economy is showing signs of bouncing back this year, pulled along by a recovery in high-income economies.”
Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the US, which began earlier this month, and to the structural shifts taking place in China's economy, the report added.