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The International Monetary Fund (IMF) has recently forecasted that Bangladesh’s economic growth over the coming months of this fiscal year will touch 5.5 per cent in the current FY23, putting it in a favourable image compared to that put by the World Bank and the Asian Development Bank (ADB)’s projections. It may be recalled that earlier in April the World Bank projected the country’s gross domestic product (GDP) growth for the current fiscal at 5.2 per cent and ADB at 5.3 per cent.
On the eve of the IMF-World Bank Spring Meetings, the IMF drew the economic growth picture of Bangladesh and the global economy in its World Economic Outlook (WEO) report at its headquarters in Washington. It also drew a rosy picture for Bangladesh’s economy in the next FY24 as it is expected to grow at a 6.5 per cent rate during that period. According to the IMF, Bangladesh will grow at a better rate (5.5 per cent) than the developing and emerging Asian countries whose average economic growth is projected to be 5.3 per cent. Among the emerging Asian nations, India is projected to grow at 5.9 per cent, China at 5.2 per cent, Cambodia at 5.8 per cent and Vietnam at 5.8 per cent.
However, the Washington-based multilateral lender also forecast inflation in Bangladesh would reach a higher rate of 8.6 per cent in the current fiscal. This assumption has led the government to suggest that there should not be additional anxiety as they will try their best to keep the inflation at 5.6 per cent in the current FY23. It may be noted that the IMF has also observed that within the global paradigm, inflation in the baseline is set to fall from 8.7 per cent in 2022 to 7 per cent in 2023 on the back of lower commodity prices but underlying (core) inflation is likely to decline more slowly. Economists in the IMF WEO have nevertheless observed that inflation’s return to target is unlikely before 2025, in most cases. Remarking on Bangladesh’s current account balance, the IMF has also noted that it could be maintained at a negative trajectory of 2.1 per cent of GDP by the end of the current FY23.
It appears that the IMF has made its assumptions on the global economy based on certain factors of uncertainty pertaining to existing financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of the Covid pandemic. It may be recalled that this led the IMF to indicate that the baseline forecast for growth to fall would be from 3.4 per cent in 2022 to 2.8 per cent in 2023, before settling at 3 per cent in 2024. The IMF has added that advanced economies are expected to see especially pronounced growth slowdown, from 2.7 per cent in 2022 to 1.3 per cent in 2023.
Before proceeding any further one also needs to refer to another interesting observation that has surfaced due to the Household Income and Expenditure Survey (HIES) 2022 of the Bangladesh Bureau of Statistics (BBS). They have pointed out that the per capita monthly income of Bangladesh has increased by more than 93 per cent to Tk 7, 614 in the last six years. In 2016, people in the country earned an average of Tk 3,936 per month. This means that the income has increased by Tk 3, 678 in the last six years. The BBS survey has also revealed that every household in the country earns an average of Tk 32, 422 per month. After splitting the amount among a little over four-member family, the per capita income stands at Tk 7, 614.
The report also states that the per capita income of the country’s people in 2010 was Tk 2, 553 which rose by 54 per cent over the next six years to Tk 3, 936 in 2016. Although the per capita income as per HIES has increased relatively this time, the report however has a big difference with the per capita income mentioned in the GDP report published by the National Statistics Wing of the Bureau of Statistics (BBS). The GDP report shows the per capita annual income at Tk 2.41 lakh, which stands at Tk 20,087 if calculated on the basis of monthly income. One has to observe that our relevant authorities need to sit down together and resolve the differences that have emerged in the process of calculation by the HIES and the National Statistics Wing of the Bureau of Statistics.
A report in a English Daily noted that “the poverty rate in Bangladesh has dropped significantly but income inequality is at an all-time high, according to the latest version of the Household Income and Expenditure survey — in a puzzling development that raises questions about the nature of economic growth seen in recent times”. The report also quoted comments made by Zahid Hussain, a former lead economist of the World Bank, saying” “If we take the HIES 2022 data highlights at their face value, there is both good news and bad news — it raises more questions than answers.”
Consequently, financial analysts are remarking that the survey shows that poverty reduction was more in rural areas, where the income growth was less and inequality, too, was less. Comparably, it has been the opposite in urban areas where poverty reduction was less, income growth was higher and inequality as a result has widened. This has led Zahid Hussain to observe, “Does higher inequality cause higher growth or vice versa? Higher growth with higher inequalities raises puzzling questions about causation.”
This difference in interpreting observations after the unveiling of the survey data has not been the same in the case of the Planning Minister MA Mannan. He said, “We are elated.” When asked about the decrease in poverty amid a period of great economic hardship around the world, he said: “the government imposed a limited lockdown and left the highways open. There were a host of stimulus packages to cushion the economy from the brunt of the shutdown. As a result, the poverty rate dropped.” In this context State Minister for Planning Prof Shamsul Alam has underlined some major achievements over the last three years— electricity access has reached 99.32 per cent in 2022, up from 75.92 per cent and 55.26 per cent in 2016 and 2010, about 92.21 per cent of households have improved toilet facilities and 96.1 per cent have access to drinking water. Reference has also been made to the HIES and their finding that the literacy rate of people aged more than seven years jumped to 74 per cent last year. It was 65.6 per cent and 57.91 per cent in 2016 and 2010, respectively. Government assistance at the rural level has also included government programmes such as test relief and the Food for Work whereby people were given cattle, sewing machines, and food support.
Nevertheless, despite several claims on different dimensions by the BBS, controversy has emerged over not only monthly income but also household expenditure. It has been claimed by some economists that monthly average household expenditure increased to Tk 31,500 in 2022, up 100 per cent from Tk 15,715 in 2016. It was apparently around Tk 11,200 in 2010, according to the national statistical agency as it released the key findings of the “Household Income and Expenditure Survey 2022”.
The BBS noted that income and expenditure of households in rural and urban areas increased in the last 12 years. However households in urban areas appear to have registered higher income than expenditure in 2022. In case of rural households, it has been the opposite.
Mustafa K Mujeri, a former Director-General of the Bangladesh Institute of Development Studies (BIDS) has observed in this regard that “as poverty is higher in rural areas, it is only logical that their expenditure will be higher than their incomes.” Apparently, the poverty rate in rural areas is 20.5 per cent and it is 14.7 per cent in urban areas according to BBS data. This has also led Mujeri to observe that “the government should work more to reduce poverty in rural areas and create additional opportunities for the people who have been left behind.”
Mujeri, also the executive director of the Institute for Inclusive Finance and Development, has observed that income inequality has been rising for many years though the poverty rate dropped successfully and the GDP has been growing. According to him there is a serious denotation as well as a connotation for the socio-economic matrix. The economist has noted, “it means the growth is not fully inclusive and we are lagging behind when it comes to improving the living condition of the people who have been left behind.” The economist has also recommended creating more opportunities for the poor and the marginalised. In this regard he has suggested that “from the government side, additional and effective policy and approach is needed.”
This is a significant suggestion because Bangladesh has been enjoying steady economic growth over the past two decades. This has also helped Bangladesh to make significant progress in many social indicators, cut the poverty rate, and raise calorie intake. Such progress has seen us do well in achieving MDG goals but we will suffer with regard to SDG goals if income inequality widens.
BBS data has also exposed that the Gini Coefficient related to income rose to 0.499 in 2022, up from 0.482 in 2016 and 0.458 in 2010. The BBS conducted the survey among 14,400 households from January 1 to December 31 last year. The BBS assumptions and the principles used for data collection pertaining to 2022 has, however, not been agreed to by some economists, including Debapriya Bhattacharya, from the Centre for Policy Dialogue.
He has interestingly observed that “the data may have been collected in the early part of 2022 when the economy was witnessing a post-Covid recovery, albeit fragmented, so this has possibly led to project a brighter development achievement.” According to the economist, one should, instead of average achievement figures, take a disaggregated look by income categories of the households. This will then assist to “reveal the wide disparity underlying the average figures.” It needs to be understood that the Gini index measures the extent to which the distribution of income or consumption among individuals or households within an economy deviates from a perfectly equal distribution. A Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.
This has led Bhattacharya to add that “there is also an alternative truth that is coming from micro studies, perceptions and views of people who have been left behind. These views and perceptions often challenge the averages obtained through national census data.”
Interesting!
Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.