High growth, yet questions galore

Bangladesh’s economy grew above 7 percent in the last four years, reaching 8.13 percent this year, making it one of the fastest growing economies in the world. For the next year, the government has set another high growth target of 8.25 percent.

However, this growth story has come under growing criticism from economists and experts who feel the high figures have not transformed into employment and wage increments. And more pertinently, they find little correlation between growth and its proxy indicators.

The economic indicators appeared depressed, fueling debate over the accuracy of the growth calculation.

The Centre for Policy Dialogue (CPD) has cited inconsistencies between the growth figure and the various indicators of the economy.

At a media briefing in April, the independent think-tank pointed out that 7 percent plus growth had not contributed to employment growth.

Agriculture crop production data was almost absent when the GDP was estimated, it said.

CPD said although jobs grew slightly in FY 2016-17 compared to the previous year, the average real income of the people decreased.

The unemployment rate has slightly declined to 4.2 percent in FY16 from 4.3 percent in the previous year, according to the Bangladesh Bureau of Statistics (BBS).

Inequality is another indicator that also raises questions about the quality of growth, as the rich-poor gap has widened to an all-time high.

As per the latest Household Income and Expenditure Survey (HIES) of Bangladesh Bureau of Statistics (BBS), the gross income inequality stood at 0.482 in 2016, up from 0.458 in 2010.

Contrary to high growth, poverty is declining at a slower pace. Poverty dropped at 1.7 percent rate between 2005 and 2010. Since then it has declined by an annualized 1.2 percent rate.

Echoing CPD, another research organization, South Asian Network on Economic Modeling (SANEM), expressed confusion over GDP growth figures, describing it as “puzzling.”

The drivers of the country’s economic growth are primarily export and remittances. But the high growth rates in recent years do not match with the sluggish growth in export and remittance, said SANEM.

The observation was made when presenting ‘SANEM’s Quarterly Review of Bangladesh Economy’ at an event held in May.

However, the international development partners who once widely differed with the government’s growth claims have now closed their estimation near to official figures. Despite that, both IMF and the World Bank project a below 8 percent growth.

International Monetary Fund (IMF) projects a 7.3 percent growth this year, terming Bangladesh as the second fastest growing economy in the world. It previously had projected a 7.1 percent growth.

On the other hand, the World Bank’s growth projection is still far below the government’s estimation. The multilateral lender projected 7 percent growth for the current fiscal year, citing that production capacity has not increased and private investment remained almost stagnant.

Earlier in September last year, ADB had projected 7.5 percent growth and later revved it up to 8 percent.

“Bangladesh’s economy is in a good shape and is likely to grow,” it said in the report ‘Asian Development Outlook 2019’ revealed in April.

ADB’s revised projection came after the government revised up its growth estimation to 8.13 percent for the current fiscal year.