Analysts find the GDP growth target at 7.2 percent to be unrealistic as investment is dipping instead of rising to support higher growth.
The issue came to light after the finance minister reset the target for the next fiscal year, the same as the current year’s, despite sensing growing political tensions ahead of the elections.
“A GDP forecast of 7.2 percent does not match the investment scenario,” said Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies.
The investment to GDP ratio was set at 29 percent to achieve the 7.2 percent growth, but in reality, it lags by 3 percentage points at around 26 percent this year.
Mujeri said it will not be possible under the present business climate for the government to increase the investment-GDP ratio to 30 percent.
“There must be a qualitative change in the business and investment climate to achieve the target.”
According to provisional estimates of Bangladesh Bureau of Statistics, GDP grew by 6.03 percent in the current fiscal year. Though Finance Minister AMA Muhith said the growth will finally be 6.3 percent, the rate is still down by around 1 percentage point than the target.
Analysts said the finance minister is least bothered about the investment required to achieve a 7 percent plus growth rate. To achieve 7 percent growth, Bangladesh needs to boost investment to the tune of 30 percent of GDP, they added.
Salehuddin Ahmed, a former governor of Bangladesh Bank, said the GDP growth target is wild and unrealistic.
“A huge boost in investment is required to attain a 7.2 percent growth,” Ahmed said, adding that he is doubtful about a significant increase in investment this year.
The former governor said he is also concerned about the performance of the banking sector.
Ahmed said a better business climate can be achieved by maintaining a relatively stable political climate, which is unlikely to happen in the coming months.
In its economic review, the Centre for Policy Dialogue said analysts had earlier projected that the GDP growth rate would be around 6 percent.
“This is certainly a setback for the present government’s plan to move the economy to higher growth,” the CPD said in its analytical review of Bangladesh’s macroeconomic performance for 2012-13.
The analysts said there are global issues linked to the country’s economic growth. They said a recovery in Bangladesh’s main export destinations is needed to achieve the higher growth rate.
Source: The Daily Star