Observing that Bangladesh’s economy is stable but not ‘certain’, the World Bank on Tuesday forecast the country will post a 6.5 percent GDP growth in the current fiscal year.
The WB came up with the projection in its latest Bangladesh Development Update, October 2015, although government is expecting a 7 percent GDP growth in the fiscal year 2015-16.
Lead economist of World Bank’s Dhaka Office Dr Zahid Hussain presented the report at a press conference at its office.
“The near term political outlook is stable as is the outlook for international commodity prices. The growth in FY 16 is projected to be sustained at 6.5 percent driven by stronger consumption and export growth,” Zahid said.
He said the raise in wages of public servants is a stimulus for consumption sector as it is likely to add 0.9 percentage point to measure the growth.
The WB lead economist, however, thinks the government’s target of 7 percent GDP growth is achievable if the private investments break away from the recent trap and the economy does not overheat during the remaining period.
Explaining the reason for what the WB thinks Bangladesh’s economy stable, Zahid said the country has now good growth alongside declining inflation, rising reserves, contained fiscal deficit and stable public debt and sound money.
There is also uncertainty about the economic growth, he said as the country is waning international competitiveness on both the supply and demand sides alongside slower agriculture growth and stagnant private investment rate.
Besides, both the domestic and international risks, political uncertainty coupled with poor infrastructure also may hamper expected economic growth.
The WB economist said Bangladesh’s growth is better than that of Indonesia, Pakistan and Vietnam and but behind China, India and Sri Lanka.
According to the WB’s Bangladesh Development Update, poverty headcount based on US$ 1.25 per day PPP is projected to fall from 43.5 percent in 2010 to 38.4 percent in 2015.
It also said inflation has declined in 2015 fiscal year and it is slightly below the target 6. 5 percent for favourable global market conditions, stable exchange rate, restrained monetary growth.
It recommends sustaining GDP and remittances growth, creating jobs, containing inflation, improving the quality of public service delivery to reduce extreme poverty and boosting shared prosperity.
At the programme, WB country director Zohannes Zutt said. “I’m quite confident that Bangladesh will continue to move forward. The country is now growing at 6.5 percent…that’s very good and certainly much better than other developing countries have done, but there are also many countries that have grown by 8-9-10 percent.
There is really no reason why Bangladesh cannot be an Asian tiger, he said adding that the country has ability to emerge as Asian tiger but it means avoiding complacency, it means looking at the challenges and the outstanding challenges.
“Bangladesh is now a lower middle-income country. There’s a struggle to have the status of a middle- and higher-income country, but Bangladesh requires addressing three large areas -– social inclusion, structural change and institutional efficiency — to become a middle- and higher-income country,” Zohannes Zutt said.
The social inclusion means ensuring that every citizen has the access to decent education, healthcare and social safety-net programmes and Bangladesh is doing very well in this area.
Structural change needs to bring people out of rural areas and agricultural into higher productivity jobs, he said adding, “The country also needs to employ more efforts to address some bottlenecks to private sector investments, particularly energy generation and connectivity.”
Finally, the WB country director said there will be a massive need of raising the competency of the country’s institutions to enable them to deal with the complexities and problems that a middle and higher income country faces.
“There’s a need of stronger efforts to build institutions and empower the persons running the institutions so that they can work out the problems and achieve the solutions,“ he added.