Special Correspondent :
Economic analysts on Saturday downgrade Bangladesh’s growth prospect this fiscal amid slowing private sector credit growth.
They said that private sector credit growth hit 33 months low in September, with signs of a slowdown in the economy.
“Political tensions associated with banking crisis dampen investors confidence and it is taking toll on the private sector investment,” former Bangladesh Bank Governor Dr Salehuddin Ahmed told The New Nation on Saturday.
He said, private sector credit growth continues to fall due to political uncertainty and it can fall further if the uncertainty prolongs centering the next election.
“Private sector investment plays a major role in job creation and GDP growth. If the investment remains sluggish it will definitely lower economic growth,” said Dr Salehuddin Ahmed.
Bangladesh economy enjoyed its strongest GDP growth over the last few years exceeding 7.0 per cent taking advantage of public spending although private investment remained stagnant during the period.
“Uncertainty over the next general election is having an impact on businesses and investment climate. A prolonged uncertainty will worsen the situation further,” Dr AB Mirza Azizul Islam, former Finance Adviser to the Caretaker Government, told The New Nation.
He said private sector credit growth is going down as businesses halted their investment plan amid election uncertainty. “A sluggish private investment will have an ‘obvious’ impact on employment and GDP growth.”
Private sector credit growth stood at 14.67 percent in September and it was weakest increase since December 2015 when it was 14.19 per cent, according to Bangladesh Bank (BB) data.
“Business climate appears to be bleak in the wake of escalating political tensions over the elections. It negatively impacts private sector credit growth and thus will adversely impact GDP growth,” Dr Zahid Hussain, Lead Economist of the World Bank’s Dhaka office, told The New Nation yesterday.
The government has projected a 7.8 per cent GDP growth for the fiscal 2018-19.
“To achieve the growth, Bangladesh needs to boost private investment. But political uncertainty blocks private investment which can lower the GDP growth,” he said, “It can also hit foreign direct investment.”
The World Bank earlier lowered Bangladesh’s GDP growth to 7.0 per cent assuming supply side constrains as a result of political uncertainty.
“The figure of private sector credit growth suggested that investors turned cautious ahead of the upcoming elections stated in December,” a Chief Executive Officer (CEO) of a private bank said, adding, “Even the bank policymakers have also tighten credit screw as a cautious approach that slowed down the credit growth.”
