Sunday, December 29, 2013

Think-tank assessment reveals deceleration in Bangladesh GDP growth

Bangladesh's gross domestic product (GDP) in the current 2013-14 fiscal year ending June next year is likely to experience a decelerating rate for the third time in a row from those of the preceding years, a leading local think-tank said Saturday.The research organisation's half-yearly assessment of the economy, coinciding with the end of the calendar year and the completion of the tenure of the present government, also stated that the growth in GDP may fall below the decadal average of 6 percent due to fiscal and monetary management trap, functioned by lack of policy farsightedness and political contestations.The leading think-tank, Unnayan Onneshan, anticipated that the real rate of growth in GDP in fiscal year (FY) 2013-14 (July 2013- June 2014) might decline to 5.65 percent against the government's revised target of 7.2 percent, though the budgetary target was 7.5 percent. In FY 2010-11, the GDP growth rate was 6.71 percent, which declined to 6.23 percent in FY 2011-12,x431 IV and further fell to 6.03 percent in FY 2012-13."The major reasons of failing to achieve the targeted level of growth of the current fiscal year are the increased gap between savings-investment, mismatch between investment demand and growth of credit to the private sector, poor rate of ADP implementation, failure to achieve the targeted level of revenue, reduction in public spending in physical infrastructure and social sectors. These have been accompanied with political contestations," It explained.The Unnayan Onneshan observed that several policy-induced macroeconomic challenges have severely restricted the maintenance of upward mobility of rate of growth in the recent fiscal years and the continuation of progress in different social sectors. 

"The measures proposed in the budget, coupled with a contractionary monetary policy and orthodox exchange-rate management agreed as part of a three-year program between the government and the International Monetary Fund (IMF) have led to slide in the rate of growth,"It pointed out that the lower collection of revenue is likely to reduce public investment, especially in infrastructure and social sectors, causing economic growth to decline. "To finance this increase in revenue expenditure, the government may have to go for further borrowing and thus trapping the country in a vicious circle of spiraling debt and deficit," it added.Simultaneously, the think-tank said that fall in revenue collection also means that the government has to increase its borrowing from both domestic and foreign sources and the former may crowd out private investment.The organization observed that the narrow tax base along with structural weakness and the wide opportunities of evading and avoiding tax have added difficulties to collection of revenue in the present fiscal year.Referring to the linkage between expansion of credit and growth in investment, the Unnayan Onneshan noted that the decline in the rate of growth in credit will drag down investment and consequentially slide down the GDP.The Unnayan Onneshan observed,uv resinnitrogen generator & inflator machine besides the large scale scams, the risk management in the banking system has weakened. The overall return on assets (ROA) that measures the efficiency of the management in generation of earning to assets stood at 0.60 percent in 2012 compared to 1.3 percent in 2011.The inflation stood at 7.15 percent in November 2013, adversely impacting on the poor and the marginalised.The Unnayan Onneshan also pointed out that the reduction in poverty has slowed down as poverty reduced by 8.9 percentage during 2000-2005 while during the successive five years (2005-2010) the total decline was 8.5 percentage points.The organisation recommended for adjustment of monetary policy with fiscal policy since reductionist policies only cut down investment demand, create unemployment and in turn hampers growth. It also proposed structural reforms in tax structure, strengthening institutional capacity in the areas of taxes in the backdrop of rising pressure on revenue collection.

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