WB projects 6.4pc GDP growth

‘Economic growth resilient despite volatile export and shrinking remittances’

Bangladesh’s economic growth remains resilient in spite of volatile exports and shrinking remittances, according to a new World Bank (WB) report—The Bangladesh Development Update, September 2017, released yesterday.

The WB projects Bangladesh's GDP to grow by 6.4 per cent in the current fiscal year. With over 7 per cent growth in the last two fiscal years, the Bangladesh government has set a target for 7.4 per cent for fiscal year 2017-18.

"This growth projection is higher than any other country, except for India. This is considered as very good. The forecast for India is 7.5 per cent, which they may not achieve at the end," Dr Zahid Hussain, lead economist at the World Bank's Dhaka office, told reporters yesterday.

The global lender forecasts China to grow by 6.3 per cent, Indonesia 5.3 per cent, Thailand 3.3 per cent, and Pakistan 5.5 per cent, in FY18. Bangladesh's growth is projected to be robust and above many developing countries in East and South Asia, driven by industry and service, it said.

It, however, said inflation is expected to be high at 6 per cent considering the rise in food prices. Price of coarse rice remains as a result of the monsoon flooding along with factors like policy indecisiveness, speculative hoarding and increased prices in India, Vietnam and Thailand, says the report.

WB expects to export growths to pick up modestly, a turnaround in remittance and boost in private investment.

The lending agency, however, finds that the rate of job creation has slowed down.

Between 2003 and 2010, total employment grew by 3.1 percent per year, which fell to 1.8 percent between 2011 and 2016.

It said stagnant private investment, weak export growth and fall in remittances have impacted the job market and that slow structural reform was hindering faster job creation.

The WB recommends regulatory reforms, revision of 'distortionary' industrial policies to create more employment along with planned urbanisation.

Citing that the Dhaka division accounts for 45 per cent of all industry jobs and 37 per cent of service job, it emphasised on creating 'strong second-tier cities'.

The WB report titled 'Bangladesh Development Update: More, Better and Inclusive Jobs can Boost Growth', also said that the rate of job creation has slowed down as in between 2003 and 2016, the Bangladesh economy generated more than 1.15 million jobs per year, on average.

However, the pace of job creation has fallen in recent years as in between 2003 and 2010, the total employment grew by 3.1 per cent per annum, whereas between 2011 to 2016 the total employment grew by only 1.8 per cent per annum. "This has especially impacted women and youth."

About the major barriers towards quality job creation, the Update said that stagnant private investment, weak export growth, and declining remittances have impacted the job market, Dhaka Division accounts for 45 per cent of all industry jobs and 37 per cent of all services jobs. Congestion along with lack of access to land constrain firm productivity increases and expansion, slow structural reform hinders faster job creation. More small and mid-sized enterprises are needed for creating jobs as micro entrepreneurs, along with household enterprises and temporary establishments, account for 98 per cent of all economic units in the country and half of the jobs, which offer subsistence earnings in the absence of formal jobs.

The report also highlighted that the way forward for Bangladesh to create more, better, and inclusive jobs are regulatory reform and revisiting distortionary industrial policies, planned urbanisation, infrastructure development, and strong second-tier cities will create more jobs, adopting new technologies and facilitating migration from Rural to urban centres will help create better jobs, creating more opportunities for youth and women to access jobs and by facilitating safer international migration, Bangladesh can create inclusive jobs.

In his presentation, Dr Hussain showed four key messages of the Bangladesh Development Update—strong growth and macroeconomic stability, but slower job creation; weaknesses in job creating growth drivers, infrastructure gap, predominance of informality in labour markets, and slow structural reforms; over 6 per cent growth likely to continue subject to downside domestic risks; and the need for policy focus on macro-financial stability, regulatory reforms, urban planning and technological up gradations.

About the 6.4 per cent growth outlook for Bangladesh, Dr Hussain said, "This 6.4 per cent growth will be very good one considering the International and regional context,” adding that the growth projection for India is 7.5 per cent in the FY18 which may further slow down, while the growth projection for China is 6.3 percent, Indonesia 5.3 per cent, Thailand 3.3 per cent, and Pakistan 5.5 per cent.

Besides, he showed that exports are projected to grow faster, remittances may turnaround, private investments may pick up, inflation to increase, and fiscal deficit could rise further due to revenue shortfall, inadequate expenditure adjustment, and unanticipated pressures (food supply and relief for Rohingyas).

Speaking on the occasion, WB Country Director Qimiao Fan said, "There is a good news about the Bangladeshi economy. Bangladesh’s economy is growing at a strong pace despite internal and external headwinds. Poverty reduction underpinned by job creation has continued, albeit at a slower pace due to lower remittances, flat exports, higher food prices and adverse natural shocks."

He said that macroeconomic management has remained prudent, as reflected in decelerating inflation and rising foreign exchange reserves. "However, the banking system remains stressed with high levels of non-performing loans (NPLs), while financial development is hampered by the dominance of National Saving Certificates as a key source of deficit financing."

Fan went on saying, "With an improving global outlook, growth in Bangladesh is projected at 6.4 percent in FY18, while macroeconomic stability is expected to be broadly sustained. This of course is subject to some downside risks, particularly the slowing down of reforms in the run-up to elections planned for late 2018 and early 2019, and a hardening of credit constraints with increased insolvency of banks due to rising NPLs."

WB projects 6.4pc GDP growth

Economic growth resilient despite volatile export and shrinking remittances

Bangladeshs economic growth remains resilient in spite of volatile exports and shrinking remittances, according to a new World Bank (WB) reportThe Bangladesh Development Update, September 2017, released yesterday. The WB projects Bangladeshs GDP to grow by 6.4 per cent in the current fiscal year. With over 7 per cent growth in the last two fiscal years, the Bangladesh government has set a target for 7.4 per cent for fiscal year 2017-18. This growth projection is higher than any other country, except for India. This is considered as very good. The forecast for India is 7.5 per cent, which they may not achieve at the end, Dr Zahid Hussain, lead economist at the World Banks Dhaka office, told reporters yesterday. The global lender forecasts China to grow by 6.3 per cent, Indonesia 5.3 per cent, Thailand 3.3 per cent, and Pakistan 5.5 per cent, in FY18. Bangladeshs growth is projected to be robust and above many developing countries in East and South Asia, driven by industry and service, it said. It, however, said inflation is expected to be high at 6 per cent considering the rise in food prices. Price of coarse rice remains as a result of the monsoon flooding along with factors like policy indecisiveness, speculative hoarding and increased prices in India, Vietnam and Thailand, says the report. WB expects to export growths to pick up modestly, a turnaround in remittance and boost in private investment. The lending agency, however, finds that the rate of job creation has slowed down. Between 2003 and 2010, total employment grew by 3.1 percent per year, which fell to 1.8 percent between 2011 and 2016. It said stagnant private investment, weak export growth and fall in remittances have impacted the job market and that slow structural reform was hindering faster job creation. The WB recommends regulatory reforms, revision of distortionary industrial policies to create more employment along with planned urbanisation. Citing that the Dhaka division accounts for 45 per cent of all industry jobs and 37 per cent of service job, it emphasised on creating strong second-tier cities. The WB report titled Bangladesh Development Update: More, Better and Inclusive Jobs can Boost Growth, also said that the rate of job creation has slowed down as in between 2003 and 2016, the Bangladesh economy generated more than 1.15 million jobs per year, on average. However, the pace of job creation has fallen in recent years as in between 2003 and 2010, the total employment grew by 3.1 per cent per annum, whereas between 2011 to 2016 the total employment grew by only 1.8 per cent per annum. This has especially impacted women and youth. About the major barriers towards quality job creation, the Update said that stagnant private investment, weak export growth, and declining remittances have impacted the job market, Dhaka Division accounts for 45 per cent of all industry jobs and 37 per cent of all services jobs. Congestion along with lack of access to land constrain firm productivity increases and expansion, slow structural reform hinders faster job creation. More small and mid-sized enterprises are needed for creating jobs as micro entrepreneurs, along with household enterprises and temporary establishments, account for 98 per cent of all economic units in the country and half of the jobs, which offer subsistence earnings in the absence of formal jobs. The report also highlighted that the way forward for Bangladesh to create more, better, and inclusive jobs are regulatory reform and revisiting distortionary industrial policies, planned urbanisation, infrastructure development, and strong second-tier cities will create more jobs, adopting new technologies and facilitating migration from Rural to urban centres will help create better jobs, creating more opportunities for youth and women to access jobs and by facilitating safer international migration, Bangladesh can create inclusive jobs. In his presentation, Dr Hussain showed four key messages of the Bangladesh Development Updatestrong growth and macroeconomic stability, but slower job creation; weaknesses in job creating growth drivers, infrastructure gap, predominance of informality in labour markets, and slow structural reforms; over 6 per cent growth likely to continue subject to downside domestic risks; and the need for policy focus on macro-financial stability, regulatory reforms, urban planning and technological up gradations. About the 6.4 per cent growth outlook for Bangladesh, Dr Hussain said, This 6.4 per cent growth will be very good one considering the International and regional context, adding that the growth projection for India is 7.5 per cent in the FY18 which may further slow down, while the growth projection for China is 6.3 percent, Indonesia 5.3 per cent, Thailand 3.3 per cent, and Pakistan 5.5 per cent. Besides, he showed that exports are projected to grow faster, remittances may turnaround, private investments may pick up, inflation to increase, and fiscal deficit could rise further due to revenue shortfall, inadequate expenditure adjustment, and unanticipated pressures (food supply and relief for Rohingyas). Speaking on the occasion, WB Country Director Qimiao Fan said, There is a good news about the Bangladeshi economy. Bangladeshs economy is growing at a strong pace despite internal and external headwinds. Poverty reduction underpinned by job creation has continued, albeit at a slower pace due to lower remittances, flat exports, higher food prices and adverse natural shocks. He said that macroeconomic management has remained prudent, as reflected in decelerating inflation and rising foreign exchange reserves. However, the banking system remains stressed with high levels of non-performing loans (NPLs), while financial development is hampered by the dominance of National Saving Certificates as a key source of deficit financing. Fan went on saying, With an improving global outlook, growth in Bangladesh is projected at 6.4 percent in FY18, while macroeconomic stability is expected to be broadly sustained. This of course is subject to some downside risks, particularly the slowing down of reforms in the run-up to elections planned for late 2018 and early 2019, and a hardening of credit constraints with increased insolvency of banks due to rising NPLs.