private investment stagnates consumption demand dives

Published: June 04, 2017 14:07:43 | Updated: October 24, 2017 12:53:28


FHM Humayan Kabir

Private investment in terms of gross domestic product (GDP) remained stagnant in the outgoing fiscal for unfavourable business climate and non-quality public investments in Bangladesh, analysts said, casting a shadow on economic advances.

 

Besides, they added, overall private consumption dropped in the current fiscal because of falling remittance, signalling for the government challenging days ahead in sparring demand which is one of the factors that propel economic growth.

 

Economists said the country's fragile governance, substandard public-sector investment, uncertain political climate, and regulatory and structural setbacks are celebrating movers to tap private investment.

 

According to Bangladesh Bureau of Statistics (BBS) provisional data, the private investment-GDP ratio at current prices in the outgoing financial year (FY) 2016-17 maintained stagnancy, hovering around 23, some 0.4 percentage points lower than its initial target.

 

In the previous FY2016, the private invest-to-GDP ratio was the same at 23.

 

Analysts said the country's overall investment-GDP ratio was estimated to accelerate into 30.3 in the current FY from 29.7 in the last FY16 mainly due mainly to injection of higher dollops of money by government into development works and bills for other expenditures.

 

The BBS data showed that the public investment-GDP ratio in the current FY2017 increased by 0.60 percentage points to 7.30 from 6.70 in the last fiscal.

 

Official data (provisional) recorded the overall investment in the outgoing FY at Tk 5.92 trillion. It was Tk 5.14 trillion in the past FY.

 

The private sector invested Tk 4.5 trillion and the public sector Tk 1.42 trillion in the outgoing fiscal.

 

World Band Lead Economist Dr Zahid Hussain told the FE Saturday that higher public investment alone could not promote private investment if that did not maintain quality.

 

"Since the incremental public investments are failing to crowd in the private investments over the years, we can easily say that government's investment is not working properly to get return."

 

The World Bank economist also sees regulatory hindrance and absence of business climate as key factors at this moment in Bangladesh for the failure in creating investment climate.

 

"If we invest Tk 4.0 and form a Tk 1.0 equivalent of capital, how the private sector will be attracted for investment here in Bangladesh," he questioned.

 

The WB lead economist noted that the government may not be so ambitious in taping private investment in the coming year as it has expected only 0.3 percentage points of investment-to-GDP growth in the next FY2018.

 

It is, however, expecting higher 1.3 percentage points of investment from its own exchequer in the next FY2018, he said. "So, when the government itself is not so ambitious to tap higher investments from the private sector in the coming fiscal, how that could be improved," he questioned.

 

Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur said lack of quality public investment is one of the major reasons behind the lower base of private investment.

 

"Despite steep rise in government investments, the fruitful result is not furnishing due to the lack of quality of the development works and poor capacity of the public agencies," he told the FE.

 

Dr Mansur finds the cost of doing business here still very high, which needs to be addressed as quickly as possible to tap the wayward private investment.

 

Meanwhile, the country's overall consumption in terms of GDP has also fallen drastically to 73.94 in the current FY2017 from 75.02 per cent in the last FY2016 due mainly to lower base of remittance inflow.

 

The private consumption-GDP ratio in the previous FY2015 was also recorded higher at 77.84.

 

However, the public consumption-GDP ratio increased to 6.39 in the outgoing FY2017 from 5.89 in the past FY2016, the BBS data showed.

 

Analysts observed public consumption got boosted mainly by feeding on higher payments to the public servants.

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