Bangladesh economy has recovered significantly in the post-Covid period and stayed on the higher trajectory of growth. It is reflected in the country's official statistics on macroeconomic situation. The final estimation of the Gross Domestic Product (GDP), released by the national statistical agency early this month, showed GDP growth at 7.10 per cent in the last fiscal year (FY22). The rate was 6.94 per cent in the previous year or FY21. During the period of Covid-19 pandemic, economic activities of the country slowed down and contracted. The outcome was a pared-down 3.45-percent growth in GDP in FY20, marking a sharp fall from 7.88 per cent in FY19.
Thus, coming back onto the 7-plus growth trajectory is still challenging for Bangladesh. As global economy is going through a near-recessionary phase mainly due to the Russia-Ukraine war, Bangladesh is also in trouble. The negative external factors cast shadow on the economic prospect of the country. Taking the reality into consideration, the government has already revised down the growth target to 6.50 per cent for the current fiscal year (FY23). Initially, the target was 7.50 per cent. With lower rate of GDP growth, the economy is also set to be hit hard by higher rate of inflation now. The government's primary target was to keep the inflation within 5.60 per cent in the current fiscal year. The consistent upward inflationary pressure has compelled the authorities to raise it to 7.50 per cent. Annual average rate of inflation has already reached 7.92 per cent while the monthly rate stood at 8.57 per cent in January last.
So, Bangladesh is now bound for a 'low-growth, high-inflation' regime although no quarterly or half-yearly data of GDP are available now. Decline in growth is clearly in sight. Different international agencies also have downgraded the growth projection for Bangladesh. The United Nations World Economic Situation and Prospects (WESP) 2023 and the International Monetary Fund (IMF) projected that Bangladesh economy would grow by 6.0 per cent in the current year. The World Bank estimated that the rate would be yet lower, 5.20 per cent to be precise, in the ongoing fiscal year.
The decline in growth is largely in line with the global growth prospect. The IMF projected that global growth would decelerate to 2.90 per cent in the current year from estimated 3.40 per cent in the last year.
A quick look at the final estimate of GDP in FY22 may be helpful to contextualising the growth prospect of the country in the current year. It showed that growth in both agriculture and industry declined although growth in services increased in the last fiscal year.
The estimate, prepared by Bangladesh Bureau of Statistics (BBS), also showed that though overall economy in the last fiscal year was largely driven by consumption, investment posted higher growth. Total consumption (at market price) increased by 7.36 per cent to around Tk 29.69 trillion in the last fiscal year from Tk 26.34 trillion in FY21. Investment jumped by 16.25 per cent to Tk 12.73 trillion in FY22 from Tk 10.95 trillion in the previous fiscal year. Though consumption-led growth is a long-term trend in the country, higher growth in investment in the past year reflects some increase in productive activities in the economy. Investment-GDP ratio increased to 32.05 per cent in the last fiscal year from 31.02 per cent in the previous year. Nevertheless, the ratio was still below the pre-Covid period. In FY19 the ratio was recorded at 32.21 per cent.
Now, the question remains whether the higher growth in investment will prevail in the current year. Different indicators show that investment has started to slow down in the second quarter of the current fiscal year. For instance, private- sector credits recorded 12.90- percent growth at the end of December last against 13.65 per cent at the end of June last. The opening of fresh letters of credit for import in the first seven months of FY23 dropped around 25 per cent from the same period of FY22. Costlier foreign exchange compels many traders to cut down their business activities.
Again, NBR's tax-revenue collection in the first half of the current fiscal year grew by 10.74 per cent against 16.80 per cent in the same period of FY22. The implementation rate of Annual Development Programme (ADP) was 23.53 per cent in the July-December period of the current fiscal year which was 24.06 per cent in the same period of FY21. Once the updated data on the third quarter is available, a better picture of the investment situation as well as the pace of the economy will come clear in sight.
Nevertheless, there is no doubt that growth prospect is subdued and higher inflation will take a heavy toll in the near future. Slowdown in investment has squeezed the overall economic activities and more people are opting for various informal work for their bread and butter. So, they will get little slice from the growth pie.
Moreover, growth in Bangladesh is discriminatory and resources are concentrated in few hands. That's why even higher growth has not succeeded in reducing the plight of the low-income people significantly. For lack of updated data on income and expenditure distribution, it is difficult to depict the real scenario statistically. Some implicit indices may, however, help to show the uneven growth distribution. For instance, though GDP-growth rate was higher in the last fiscal year, the growth in per-capita GDP dropped. Per-capita GDP increased by 9.20 per cent to $2687 in the last fiscal year from $2462 in FY21. But, it increased by 10.20 per cent in FY21 from $2234. Now, decline in growth in the current year will further marginalise these people.