Belated though, perhaps an enquiry into the performance of the Bangladesh economy for the year that passed would not be out of tune. Normally an economy like that of Bangladesh is forced to pass through a set of shocks and setbacks. Some of these randomly occur and are mostly natural while others are man-made and at times deliberate. Be it either way, Bangladesh has seemingly learnt to live with these calamities.
The shock generated in the society in 2016 by a group of young militants, storming into an upscale restaurant in the heart of the capital's diplomatic zone to brutally murder a number of foreigners and locals, was unseen and beyond any stretch of imagination. In fact, the attack, allegedly, pierced through the hearts of our main export readymade garments, severely tarnished our image abroad. However, the good news is that the fear from the terrorist attack melted away soon following the government's tough actions to root out militancy from the country.
Another unseen or unheard-of shock coming from hacking of the central bank's reserves was no less jolting. Besides these two incidents, the year passed off reasonably well to make the economic wheels move well.
Notwithstanding shocks and setbacks and amid suspicion of economists, the Bangladesh Bureau of Statistics (BBS) disclosed that the country's gross domestic product grew at 7.1 per cent in fiscal 2015/16. This is a major achievement at least when the growth rate remained stalled at an average of 6.5 per cent or so for a decade - for the first time in history led by a double-digit growth in the industrial sector. Of course, the explanation is that most of the incremental growth originated from implementation of the new pay scale for the public sector.
The year 2016 also displayed another bout of better performance in the agricultural sector with a consistent rise in rice production in spite of declining farm lands. Bangladesh now produces about 35 million tons of food grains against 10 million tons at the time of independence. Over time, population size doubled but food grain production tripled to reject the Malthusian doomsday. The year also witnessed another round of good policies supporting agricultural growth. However, the marginal fall in the growth rate of agriculture should lead us to think that low hanging fruits have been harvested; to get high hanging fruits, we need new kinds of technology and research.
There was an apprehension of heat in political arena hovering over January 5 election; fortunately the country was relieved of the tension as nothing of that sort could happen or was allowed to occur. This has helped the economic actors with some degree of certainty needed for investment, business and trade. On the other hand, the export sector performed very well in the face of global slowdown and domestic challenges. Another unexpected positive sign is related to capital market. At the end of 2016, the capital market suddenly was poised to produce hopes and aspirations by recording 9 per cent gain in index!. Reportedly, the market was mostly driven by active participation of local and foreign investors as well as by a rise in confidence level of the players. Foreign currency reserves stood at $31.92 billion. enough to cover 8 months of import. However, proper utilisation of this huge reserve continues to be major concern.
Overall inflation declined and food inflation dropped, thanks to a good rice harvest, declining international food prices and a stable exchange rate. However, non-food inflation rose as a result of suppressed domestic demand, increase in wages, electricity and gas prices. The balance of payment (BoP) remains comfortable with a large surplus in both current and financial accounts, due to recovery in export, increased Foreign Direct Investment and aid disbursements. Monetary targets are under-achieved due to limited growth in domestic credit.
With its contribution to gross domestic product (GDP) growth declining from 1.5 percentage point to 1.3 percentage point, stagnating private investment remains a concern. Other challenges to the economy include decline in agricultural growth, appreciation in Real Effective Exchange Rates, a struggling banking sector with weak governance in state-owned banks coupled with slow pace and quality of development spending. Progress in diversification of export products and markets remains slow. There is also excessive dependence on member-states of the Gulf Cooperation of Council (GCC) for remittance inflows.
Bangladesh dropped three places to 123rd in 2016 global Enabling Trade Index of 136 countries despite improving overall scores. "All the economies of South Asia have improved their score over the past two years contributing to the positive economic momentum currently experienced by the region but Bangladesh is behind all five other South Asian counties included in the index". Many important projects envisaged were hardly completed or reached targets on time. At the end of the fiscal year, a rush for completing ADP projects resulted in wasteful projects with little impact on productivity in the economy. In the last budget speech, the Finance Minister assured us of meeting some of the problems and embarking on a new era of sustaining 7.5 per cent growth rate per annum for next five years.
Until then, let us keep our fingers crossed especially in the event of Donald Trumph disturbing much the existing international economic order. Hope, the year 2017 passes off peacefully.
The writer, a former Professor of Economics at Jahamgirnagar University, is Chair, Department of Economics and Social Science (ESS), BRAC University. [email protected]