The Asian Development Bank (ADB) on Tuesday projected that Bangladesh may achieve 5.6 percent GDP growth in the current fiscal against the government’s target of 7.2 percent.
However, the Finance Minister during a half yearly statement on the economy revised the target saying that it might be 6.5 percent.
“This is our mere assumption that the political situation will be stable in the fiscal 2015. But political unrest if recurs will undermine macroeconomic stability and fuel the inflation. We don’t know about the future (of politics),” said Zahid Hossain, principal country economist of ADB.
He came up with the remarks while launching the ADB’s annual publication ‘Asian Development Outlook 2014’ at its local office.
“Political stability is an essential prerequisite for ensuring that economic activities to take place normally,” he said.
ADB deputy country director Oleg Tonkonojenkov also spoke on the occasion.
The ADB protected South Asia’s growth to be 5.3 percent while India’s 5.5 percent and Sri Lanka’s 7.5 percent.
Underscoring the need for improvement of infrastructure and boosting private investment, the multilateral donor agency said Bangladesh needs to boost investment in infrastructure and develop skills to raise the economy’s productive capacity if wants a growth between 7 and 8 percent.
Investment has remained virtually stagnant at around 25-26 percent of GDP over the past several years and needs to be raised to 32-33 percent range, observed the ADB.
The donor agency identified last year’s political unrest that led to fall in export-import business, affected consumer and investor’s confidence and also the fall in remittance inflow as the key reasons for a lower projection of the growth in 2013-14.
The ADB said the export growth is expected to slow down to 9 percent in 2014 against 10.7 in 2013 while agriculture sector is expected to grow to 3 percent. The industrial growth is expected to slow down to 8 percent because of output lost due to the recent political unrest.
Services growth is projected to slip to 5.4 percent due to lost sales, while inflation is projected to rise to 7.5 percent in fiscal 2014-15 from 6.8 percent in 2012-13.
According to the ADB, the fiscal deficit target is set at 4.3 percent of GDP, lower than 4.5 percent in 2013.
The ADB, however, said the growth in 2015 is expected to rebound to 6.2 percent, aided by higher remittance and export growth, and the prospect of continuous recovery in the US and the Euro-zone areas.
It said the remittance declined by 7 percent in the first eight months of fiscal 2014, reflecting reduced employment overseas, especially in the Middle-East. Overseas jobs for Bangladeshi workers fell by 13.1 percent in the first eight months of the current fiscal.
“Remittance is expected to decline by 3 percent in the current fiscal, but then will grow by 7 percent in next fiscal 2014-15,” it said.