Bangladesh is continuing its strong development trajectory, even as the pace of poverty reduction has slowed down, said a new World Bank report titled “The Bangladesh Development Update April 2018.”
In the opening remarks during the release of the report on 9 April, Qimiao Fan, World Bank country director for Bangladesh, Bhutan, and Nepal, said despite having floods twice impacting agriculture, the country had maintained robust growth in the current fiscal year. “While actual graduation is a few years away, this is an important milestone,” he added.
Manufacturing growth projected at 13.2 percent in FY18 from 10.2 percent in FY17, though job creation growth was only 2.3 percent in 2017. Dr. Zahid Hussain, the Lead Economist at the World Bank, raised a question to the journalists to know the reason behind this puzzle.
Using advanced technology and machinery in the manufacturing sector could be one of the reasons behind this puzzle, said Textile Today reporter, however, Dr. Zahid Hussain said, “It may happen in garments sector but what will you say about the other sectors. And I think garments industry just started using advanced technology, it is not spread out around the industry in vast level.”
- Industrial production and services growth remained resilient.
- Inflation has accelerated, primarily due to supply shocks.
- Monetary policy has been accommodative.
- Financial sector vulnerability is rising.
- With a tightening of prudential controls, lending rates are back to double digits.
- Despite significant recovery in both exports and remittances.
- The current account deficit widened sharply, driven by a surge in imports.
(Source: A new World Bank report titled “The Bangladesh Development Update April 2018.”)
Its exports have rebounded – primarily led by the Ready-Made Garments (RMG) sector – with a 6.33 percent growth in FY18, compared with 4 percent in the previous year. A 17 percent growth in remittances, with more Bangladeshis going to work abroad, combined with an effective action against illegal money transfers, may have contributed to the recovery, said the report.
Despite macroeconomic challenges, GDP growth is projected to be robust, in the 6.5 to 7 percent range during FY18-20. However, Planning Minister AHM Mustafa Kamal is shocked over the downsized projection by the World Bank.
“I am sorry to World Bank (WB). I can’t accept your forecast on gross domestic product (GDP) growth in the current fiscal,” he said while addressing at a press briefing at NEC conference room at Sher-e-Bangla Nagar in the capital on 11 April.
The key growth drivers are expected to be exports, driving manufacturing growth, and services, driven primarily by domestic consumption. However, private investment, which stagnated in recent years, is expected to pick up with growing confidence on infrastructure development prospects, strong domestic demand, and stronger global markets.
Poverty is falling but at a slower rate. The national poverty rate fell in both rural and urban areas, but the speed of reduction was much slower in urban, largely because of slower rates of poverty reduction in Dhaka and increasing poverty in Chittagong. With the increase in urban population, now more people (3.3 million) lives in extreme poverty than in 2010 (3 million).
Dr. Zahid Hussain said, “With inequality in agricultural growth, more than half the population are vulnerable to falling back into extreme poverty. In addition, the influx of over 688,000 Rohingyas since August 2017 has put a strain on resources for host communities in Teknaf, Cox’s Bazaar”.
The reports highlighted key challenges like macro stability challenges include a rise in inflation due to increase in international inflation as well as expansionary macroeconomic policies and persistent external deficit due to continued growth in payments for food, industrial raw materials, capital goods and machinery imports.
Dr. Zahid Hussain said that with around two million young people entering the job market every year, Bangladesh must achieve export-led growth by breaking into new markets with new products to create more and better employment opportunities.
The country needs to improve the business environment, strengthen the regulatory framework, and enhance infrastructure project management to achieve Sustainable Development Goals by 2030, he added.