The World Bank (WB) said Bangladesh may lose $1.4 billion in the current fiscal year due to political unrest.
The overall loss may include 86 per cent in services, 11 per cent in industry and the remaining three per cent in agriculture sector.
The projection came in the multilateral lender’s latest edition of ‘Bangladesh Economic Update’, a survey report on the effect of political instability on GDP released on Wednesday.
“This loss may reduce the growth rate from the 6.2 per cent benchmark to 5.4 per cent,” the WB report says taking into account the impact of political turmoil in November and December last year and then deflated the result to get the projected real GDP of FY14.
“The projected growth of 5.4 per cent is not bad,” said Zahid Hussain, lead economist of WB’s Dhaka office, while releasing the report.
Hussain, however, said that the most affected area is services while the less affected sector is agriculture.
The released report shows that foreign exchange reserves have increased to adequate levels, with a sustained large surplus in the overall balance of payments. The external current account surplus has remained comfortable due to good export growth and weak imports, which offset the decline in workers’ remittances.
“The financial sector is stressed. A rise in default risk across the board due to losses inflicted by a prolonged disruption in production and trade has worsened the state of the banking sector, the report added.
But the state-owned banks were already negatively impacted by the earlier financial scams. The growing non-performing loans of private commercial banks are also a matter of concern, it added.
The fiscal deficit and public borrowing have remained within sustainable limits. Fiscal management this year is facing challenges because of a large and growing shortfall in NBR tax revenue, demand for fiscal support from sectors adversely affected by the political turmoil and slower utilization of ADP.
Tax revenue growth in the first seven months of FY14 was barely 10 per cent. Government bank borrowing so far has been contained, while net non-bank borrowing has increased.
Bangladesh faces three sets of formidable challenges and these are maintaining stability and resolving the remaining political uncertainties while boosting investment in power and roads, managing well the transition in the readymade garment (RMG) industry and the last one is stemming the decline in remittances, reports of World Bank added.
