Kazi Zahidul Hasan :
Bangladesh’s overall economic performance in 2017 was a mixed bag with several positive signs, but with alarm bells on banking sector along with sluggish investment and capital flight.
“To get an economic snapshot of Bangladesh before the start of a new year, we should look at some indicators to evaluate the country’s overall economic performance. Most of the indicators of the economy were showing good signs in 2017,” Dr Zahid Hussain, the lead Economist of the World Bank’s Dhaka office told The New Nation.
He said that Bangladesh economy was gradually accelerating and growth stood to 7.28 per cent up to June 30, 2017. But the potentials of economy remained almost untapped due to poor economic governance coupled with lack of much needed reforms to ease of doing business.
“The year started with the economy reeling under banking crisis and it intensified at the end of the year. Bad loan and irregularities dragged the banking sector down crippling the lending activities. The problem remained throughout the year seeking urgent attention,” added Dr Zahid Hussain
He further said, investment demand remained muted and companies and corporate groups shy away from investments despite the prevailing low interest rates due to lack of business climate and political uncertainty.
“Bangladesh suffers from a challenging business environment leading to more insecurity and uncertainty, which could have a negative impact on investor confidence. Political uncertainty will need to be managed, particularly with a view to creating an attractive environment for domestic and foreign investment. The investment cycle is unlikely to recover in the next year,” he said.
While agriculture and services growth continue to pick up, investment, remittance and export growth remain subdued in 2017 partly because of banking sector stress, lack of necessary infrastructure, structural reforms and product diversification,” said economist Dr Ahsan Monsoor.
“Bangladesh heavily relies on limited exportable items putting its export growth at risk. The government should provide all-out policy support to the potential export industries to keep export growth unhurt and crate employment opportunities,” he said.
In FY’17, Bangladesh exported over $28 billion in clothing, second only to China. Clothing exports make up almost 15 per cent of the GDP and 80 per cent of all exports. The country’s total export stood at $34.83 billion in the fiscal ended on June 30.
Dr Ahsan Monsoor further said Bangladesh must come out from the apparel led export growth to avert future shocks in global economy.
He also expressed dismay over falling remittance and export growth, banking crisis and limited employment opportunity in the country. “The low job growth is also hindering a higher economic growth,” he added.
When asked, the economist said, private investments remained stagnant in 2017 and it would not pick up unless political uncertainty is removed.
Dr Ahsan Monsoor identified the unusual rice price hike as the most worrisome development of Bangladesh economy in 2017. The rice price hike should be controlled at any cost to maintain economic stability in 2018.
“The fundamentals of the economy remained strong in 2017 taking advantage of strong fiscal consolidation, buoyant foreign reserve, low global commodity and oil prices and increase in public investment. But twin floods damaged a vast cropland and battered rural infrastructure causing an adverse impact on economy,” said economist Dr Khondoker Ibrahim Khaled.
The former Bangladesh Bank Deputy Governor also said an upturn in inflation stemming from food prices, downturn in export and remittance and banking crisis put a downside risks for the economy in the near term.
“Lower inflow of inward remittances might have some adverse effects on the domestic demand while falling trend in export earning is likely to put pressure on the exchange rate. Both factors may fuel the inflationary pressures on the economy indirectly if the existing trend in inward remittance-and export earning continues up to 2018,” said Dr Khondoker Ibrahim Khaled.
“A well-coordinated monetary and fiscal measure could help mitigate inflationary risk in the near future,” he said.
Economists, however, expressed serious concern over the unabated money laundering in various form saying a powerful quarter is diverting huge fund out of the country eroding the fundamentals of the national economy.
“Money is flying out of the country rapidly and it could peak up further in the next year,” they added.
