Bangladesh
2 years ago

New base year changes Bangladesh's growth arithmetic

Illustrative photo
Illustrative photo

Published :

Updated :

A new base year in economic calculations gives the government some solace about Bangladesh's struggling investment-GDP ratio as it yields a rise by 0.84 percentage points with a private-sector leap, analysts said Saturday.

The private-sector investment-to- GDP (gross domestic product) ratio rose by 2.55 percentage points in the new estimation from that of the previous one, Bangladesh Bureau of Statistics (BBS) data showed recently.

On the other hand, public investment- to -GDP ratio has fallen by 1.71 percentage points in the new estimation compared to the previous one, the government data showed.

Meanwhile, economists and analysts raised questions over the new estimation and wanted to know details from the BBS about the big leap in the private investment-GDP ratio as well as the reasons for the fall in public-sector investment share.

The statistical bureau recently unveiled the GDP statistics after changing the base year to 2015-16 from the earlier consideration of 2005-06.

After the updating of the base year, Bangladesh's near-stagnant investment-GDP ratio got a boost to 30.76 per cent in the last fiscal from 29.92 per cent in the previous FY2020, the latest official data show.

Based on the new base year, the BBS has estimated the size of the country's GDP at US$411 billion. As per the old base year 2005-06, the GDP was recorded at $355 billion in August last year.

In the wake of the Covid-19 pandemic, the investment flow in the last fiscal further slowed down and fell below 30-per cent mark after maintaining a rising trend over the previous few years.

The BBS in the provisional estimation (based on the year 2005-06) in September this year showed the investment-GDP ratio lower at 29.92 per cent from 30.47 per cent in the previous FY2019-20.

Analysts said although the Bangladesh government has been trying to attract private investment over the years, the flow is on the slow lane due mainly to unfavorable business climate in the country.

Now, in the new calculation on the base-year 2015-16, the investment-GDP ratio marks a leap as the key business indicator picked up to 30- per cent club from its preliminary estimation of the same in FY2021.

Former Lead Economist of the World Bank Dhaka office Dr Zahid Hussain said when the private investment rises and the overall GDP growth falls its means " efficiency has plunged".

"So, this jump in the private investment is definitely raises a question," he said, adding they have to know further about the estimation method after changing the base year.

About the lower public investment-GDP ratio, Dr Hussain said since the investment-to-GDP ratio drops by 1.71 percentage points in the fresh calculation compared to the previous one, then it raises a question whether the last estimation was an overestimated one.

Centre for Policy Dialogue Research Director Dr Khandker Goalam Moazzem told the FE that it was interesting that when the GDP at current price has been enhanced by some 15.7 percentage points based on the new calculation year 2015-16 compared to the old base year 2004-05, how the private investment growth could be 29.7 percentage points.

On the other hand, the public investment has dropped by 7.0 percentage points due to the consideration of the new base year compared to the old base year 2005.

"So, it creates questions. How the private investment-GDP ratio could swell massively only for the inclusion of some new survey data, products, and services?"

It needs description from the BBS about the higher private investment and negative growth in the public investment in terms of GDP size in the fresh calculation, Dr Moazzem said.

Meanwhile, analysts say the Covid-19 pandemic that unsettled all set orders of life and business pushed Bangladesh into backgear as regards fulfilling its ambitious target of enhancing the investment-GDP ratio to 32.3 per cent in the last fiscal, concluded in June 2021.

In addition, the lingering of the coronavirus pandemic is giving Bangladesh a worse signal for the new financial year, FY2022, when the government wants to boost the investment-GDP ratio to 33.1 per cent.

According to BBS's data, private investment in proportion to total GDP had dipped to 21.25 per cent in the last FY2021, some12.95-percentage- point lower than the targeted 24.2 per cent.

Amid the global epidemic caused by Covid-19 virus and more vitiated by its various variants, most spending and investments were coming from public money in packages with private people caged home under lockdowns and businesses shattered under shutdown, until the current rebound began.

[email protected]

Share this news