Bangladesh’s economy is on a stable path but there is no certainty it would remain so due to some domestic and external risks, the World Bank said on Tuesday.
In its Bangladesh Development Update, the international lending agency said that unresolved political uncertainty could hurt growth prospects by hindering confidence rebuilding, leading to a stagnation of private investment.
There are also some external risks including lower competitiveness on both supply and demand sides in international markets and weak global economy, particularly a slow-down in Chinese economy, it said.
The multinational lender also projected economic growth at 6.5 per cent for Bangladesh for the current fiscal year 2015-16, 0.5 percentage points lower than the government’s target of 7 per cent growth.
‘External competitiveness is eroding, resulting in declining export of goods and services and weak recovery in remittance in FY15 than that of previous year,’ the World Bank lead economist Zahid Hussain said while presenting the keynote observation on the BDU for October 2015.
The proposed Trans-Pacific Partnership (TPP) agreement has also emerged as a new risk for Bangladesh, particularly in exports to US market, as Vietnam, one of the main competitors of the country, will get zero duty benefit in the market once the agreement takes effect, he said.
Zahid said that TPP might not create a threat for Bangladesh in near future, but obviously it is a medium-term threat for the country.
The domestic risks, including political uncertainty, constraints in infrastructure and institutional reforms, and financial sector vulnerability, would hamper investment and productivity, he added.
He said that Bangladesh economy would grow by 6.5 per cent in the current fiscal year mainly on increased domestic consumption and rebounded exports.
Stable political and economic situation is also a precondition for the projection, he added.
‘Every year the government spends huge amount of money in infrastructure but results are not seen in the field,’ Zahid said.
Wastage of public funds, inefficiency in implementation of development projects and corruption may be the reasons for the situation, he said.
In case of private investment, he said that absence of congenial environment for investment, not political uncertainty, was the main reason for slower private investment.
The WB also examined the move of domestic prices of three import-based products—wheat, sugar and edible oil—in line with price fluctuations in the international markets.
Prices of these products rise faster in the country whenever international prices increase but it takes longer to fall after the prices of the items in international market decreases.
Speaking on the occasion, WB outgoing country director Johannes Zutt said that Bangladesh did well in social inclusion but it would have to do more in structural transformation in economy, infrastructural development and raise the level of efficiency of institutions.
Source: New Age
