The recently-released "World Economic Outlook" by the International Monetary Fund (IMF) – predicting Bangladesh to be the fastest growing economy in South Asia with a likely GDP growth rate of 4% against a nearly 10.5% contraction of India's economy – has been the talk of the town in recent days.
Moreover, Bangladesh has been projected to be fourth in all of Asia and sixth in the global growth race in 2020 defying all odds of the ongoing economic recession induced by the Covid-19 crisis – which is thought to be the steepest in living memory. So far so good.
What has, however, startled the keen economic observers of the sub-region is that the per capita GDP of Bangladesh may overtake that of India which was at least 40% higher just five years ago. Given the size of the economy, which is now over three hundred billion US dollars – and mind it was only eight billion US dollars in 1972 – unlike smaller economies like the Maldives and Sri Lanka, this may have created some ripples in the policy landscapes in South Asia.
This is nothing to be complacent about. We need to look back to our difficult starting point of this marathon when more than eighty percent of the people were categorised as poor – people who were just surviving with acute hunger. The fertility rate was about six children per eligible couple. It has by now come down to about two, i.e. the replacement rate, thanks to the early investment in primary health and education, plus nutrition, both by the government and other non-governmental actors. Consequently, the life expectancy has gone up to nearly 73 years though it was below fifty years just fifty years ago.
The divergent growth projections – from 1.6% by the World Bank and over 6% of the Asian Development Bank with the IMF staying in between – show the challenge of forecasting. Surely, one lesson is clear: despite these divergences, Bangladesh stands tall on a comparative cross-country basis. Let this be a source of inspiration, not of complacency.
We need to sail even harder and reform faster. In particular, the ongoing onslaught of the Covid-19 crisis has been clearly revealing our faults and we have got to pull our socks up to address those vulnerabilities – particularly the tertiary health sector and those coming from climate change challenges.
Our focus needs to be on building stronger the base of the pyramid, diversifying and further modernising our agriculture and economy as well as integrating it more with the world economy so that we can have an inclusive and green recovery in the post-Covid-19 world. The other two areas of our strength have been export-led manufacturing and remittances from abroad that have been bolstering our external economy by growing the foreign exchange reserve and comfortable debt-GDP ratio.
In addition, our lower money supply-GDP ratio – thanks to the prudent and cautious pursuit of innovative monetary policy for more than a decade or so – has provided space for monetisation and courage to policymakers to go for a number of robust stimulus packages as early as the first week of April this year.
While the implementation of those stimulus packages – particularly for those living at the base of the pyramid – ought to gain further speed, it can still be comfortably argued that this was a smart move by the government which helped regain the business sentiment amongst the entrepreneurs. This includes small and medium-sized enterprises. The economic caravan has started moving again based on that business confidence.
To boost domestic demand, agricultural output and overall exports, we need to upgrade the domestic supply chain and participate in the global value chain – beyond RMGs. Jute and agro-processing products are already far better in the global export market. Pharmaceuticals and ceramics, too, are showing significant potential. And we have got to remain focused on improving the environment for remittance earnings by enhancing their skills and removing the exploitation by dalals (extortionist middlemen).
For a successful post-Covid-19 recovery, we need to focus on upgrading agriculture, infrastructure and, of course, human capital. For that matter, deepening digital financial inclusion plus reining in on government revenue and expenditure efficiency will be the key. In other words, we need to continue to invest in people encompassing education, health and smart social protection.
Secondly, we must be more compassionate to the nature that has been so caring to us. Look at how the Sundarbans, nature's infrastructure, stood by to save our people during the strong cyclones like Amphan. Finally, Bangladesh must continue to invest more on the digital transformation which has proven so useful during the semi-lockdown days when businesses and offices looked so vulnerable. The digital payment system, including mobile financial service and agent banking, came in so handy during those difficult days.
This developmental marathon must continue unabated and we should remain focused on the dynamic shifts of our economy that are already in motion. We must continue our policy support to ease the rules and regulations for both entrepreneurs and people who receive their services. In fact, easing of business and governance services is itself a better stimulus than just pouring in more money. For that matter we must remain supportive of the changes that are already taking place and may have been accelerating in the changed context.
The author is Bangabandhu Chair professor, Dhaka University and former governor of the Bangladesh Bank.