Bangladesh is among the five fastest growing economies in the world, the World Bank said in a recent report. “The economy of Bangladesh is growing at animpressive pace due to many factors, among which construction of mega infrastructures, remittance, and bumper crops production have especially helped continue the growth,” Dr Zahid Hussain, the lead economist of the World Bank in Bangladesh told Bangladesh Post.
According to the official sources, Bangladesh’s gross domestic product (GDP) growth already reached 8.13 percent. The ranking by the World Bank followed impressive industrial, agricultural and export growth as well as massive infrastructure development programmes which are underway. It also said that a ten percent increase in remittances this fiscal against the same period (8 months) last year makes the economy even more vibrant.
Bangladesh is fifth in the rank of growing economies after Ethiopia, Rwanda, Bhutan, and India respectively. The viewpoint was revealed in a new World Bank report titled, ‘The Bangladesh Development Update April 2019: Towards Regulatory Predictability’, published recently. Hussain who is also one of the lead authors of the published report, explained, “Rapid growth of electricity generation appears to have energized the urban formal and rural non-farm economy. Bumper crop harvests helped further. On the demand side, private consumption has remained strong, underpinned by strong remittance and rural income growth.”
He also said that Bangladesh has maintained its robust growth performance. Exports and remittances have been buoyant. On remittance the report mentioned that officially recorded remittances in the first eight months of this fiscal year reached $10.4 billion, an increase of 10 percent from the same period of the previous year. Remittance from Gulf Cooperation Council (GCC) countries during this period rose 15.1 percent.
Remittances from Saudi Arabia, the main source for Bangladesh, increased by 20.9 percent and accounted for over a third of the total increase in remittances during the first eight months of FY19. The larger stock of Bangladeshis working abroad strengthened surveillance against hundi informal channels and a depreciating currency against the US dollar are likely to have contributed to the increase in officially recorded remittances, the report pointed out.
Agriculture had bumper harvests, the report mentioned adding that the overall inflation has slowed as decelerating food inflation offset a pickup in non-food inflation.Elaborating on the bumper agriculture output, the report detailed that aman, the second biggest crop out of the three rice crops produced in a year, had a bumper harvest in 2018. Aman output,which typically accounts for 40 percent of annual rice production, is estimated to rise to 14.1million metric tons (MT) in this fiscal, compared with 13.5 million MT last season, according to theBangladesh Bureau of Statistics (BBS).
More than 5.65 million hectares of land were brought under aman cultivation, which is 3.5 percent higher than last year, induced by remunerative producer prices at planting time. The Department of Agricultural Extension (DAE) estimated that aus production (the smallest of the three rice crops) increased 7 percent in 2018 from that a year ago. The Food and Agricultural Organization (FAO) has projected paddy output to rise to 53.6 million MT in 2018, higher than the five-year average of 51.7 million MT, because of higher plantings by growers and favorable weather.
On industrial growth the report said that the Quantum Index of Industrial Production (QIIP) increased by 18.5 percent in July-October 2018 relative to the same period the previous year, driven by 24.5 percent in growth of textiles which carries a 34.8 percent weight in the composite QIP. Pharmaceuticals, non-metallic minerals, leather and chemical products, which together account for 24 percent of the QIP, also had decent double-digit growth in July-October 2018, the report said. This performance follows the 12.1 percent industrial growth achieved in FY18, led by growth in the large and medium scale manufacturing.
Constructions appears to be growing strongly in particularly this fiscal, as indicated by the rise inimports of iron, steel, base metal and capital machinery increasing by more than 13 percentduring the first half of FY19. The construction sector is playing an increasingly strong role in the economyamid continued urbanization and an array of large infrastructure projects undertaken by the government, the report added.
Growth in electricity generation appears to have been a critical factor in sustaining the industrial expansion, the report analysis said. Installed capacity was 18,275 megawatts (MW) in November 2018, with peak production for the year at 11,623 MW. Within eight years, the real capacity increased by a factor of 3.3, and energy served, or actual energy generation more than doubled over the past decade.
Export growth has picked up, the 55-page report said adding that after a modest 5.3 percent expansion in FY18, cumulative export earnings in the first seven months of FY19 surged to $24.2 billion, an impressive 13.4 percent increase from the same period of the previous year. This reflects 14.5 percent growth in readymade garments (RMG) and 8 percent growth in non-RMG exports, rebounding from a 9.5 percent decline in FY18. Strong US economic growth and the US-China trade dispute have played a role in this growth. Export to US markets rose by 17.4 percent, compared with only 1.4 percent growth during the same period last fiscal year, the report revealed.
Exports to China grew by 30.3 percent, compared to 27.2 percent decline during the same period last year. Growth was led by exports of agricultural products, pharmaceuticals, plastic products and home textile. Dr Zahid Hussain, however, reminded that the GDP growth of 7.6 percent must be sustained to prepare for the 2024 when Bangladesh graduates from least developed country status to developing country status.
He said, “It is very crucial for facilitating market access for the private sector who are the key players in the economy. Because once we graduate to middle income country status we would no longer enjoy ‘zero’ tariff on export of certain goods to Europe and North America.” He continued, “To face imposition of new tariff from 2028 (3 years grace) we must accelerate and enhance involvement of private sector which would be the key players in exports from Bangladesh to those countries which would no longer allow zero tariff. We must negotiate from now for access to such global market economy.”