Growth assumptions for next fiscal unrealistic: Economists

Leading economists are not in agreement with the government’s growth assumptions for the fiscal year 2014-15 saying those are not sufficient for a higher trajectory of growth.

They also found a number of assumptions not compatible with ground realities. The government is likely to project a 7.2 per cent GDP growth for the next fiscal (2014-15) in the budget documents.

The Ministry of Finance in the budget documents prepared for the next fiscal expects that the political situation would remain stable in the next fiscal with the private sector getting back its confidence to make fresh investments.

budgetThe ministry also assumes that the private sector credit would also grow at a decent rate in the next fiscal, reports the Financial Express.

It also assumes that remittance inflow will start picking up, thus, providing a stimulus to the rural economy.

The ministry is also hopeful about weather remaining favourable to help the agriculture sector contribute to nearly 20 per cent of the economy.

Dr. Zahid Hussain, lead economist at the Dhaka office of the World Bank (WB), said finance ministry’s assumptions are not sufficient for the economy to grow over 7.0 per cent in the next fiscal year.

He said the Bangladesh economy will grow once there is an annual investment equivalent to 5.0 per cent of the gross domestic product (GDP).

He said: “Not only public investment, the private sector investment too is very important and combination of both might take the economy to higher growth path.”

He said another option is to raise productivity of the existing plants.

Quoting a recent finding of the IFC (International Finance Corporation) on capacity utilisation, the WB’s lead economist at its Dhaka office said Bangladesh’s most of the existing manufacturing plants have already utilised their optimal capacity.

“It is hardly possible to raise productivity further,” Dr. Hussain said.

He said there remains another option—expansion of capacity of the existing plants. “Expansion of the existing plants, however, needs adequate investment,” he noted.

Dr. Zaid Bakht, director (research) at the Bangladesh Institute of Development Studies (BIDS) said there was no political disturbance since January but it does not mean there will be no political uncertainty in the country in the next months.

“Political uncertainty still persists although there is no political disturbance,” he said.

He said political uncertainty is not visible. Yet it erodes investors’ confidence fast.

Dr. Bakht said there is little chance of boosting the remittance inflow overnight.

“The remittance inflow did not fall overnight and it will not grow overnight also,” he said.

He, however, said the government assumption about favourable weather might prove correct as the country has been witnessing favourable weather over the past few years.

“In my mind, projection of weather condition might come out true,” he said.

Dr. Ahsan H Mansur, executive director at the Policy Research Institute (PRI) said assumptions are nothing but expectation on the part of the government.

He said political uncertainty is likely to persist in the next fiscal as there is no move from the government side to remove it.

“As long as the causes of political uncertainty are not removed, the investors’ confidence will not be restored,” he noted.

He said the situation with remittance inflow is unlikely to improve in the next fiscal year. This is very much important to stimulate the rural economy,” he further noted.

Dr. AK Enamul Haque, chairman of the department of economics at the United International University said assumption about political stability is quite difficult to make.

“There might not be restive politics witnessed during the last October-December period, but there will be uncertainty and it will affect investment,” Dr. Haque said.

He said remittance might grow to some extent but it will not grow significantly in the next year as the number of people going for overseas jobs is not rising fast.