Private sector credit growth has been sluggish, capital machinery imports declined, and industrial production grew slower in the outgoing fiscal year than a year ago.
The rate of the implementation of the Annual Development Programme (ADP) was at 49.09 per cent in the July-April period of FY21, the lowest in a decade.
From the figures, one may conclude that the economy of Bangladesh has not been doing well this fiscal year than the previous year. However, the figures made public by the Finance Division paint a different picture. It showed the economy fared well in FY21 than in FY20!
In the Medium Term Macroeconomic Policy Statement (MTMPS) for the fiscal year 2021-22 to 2023-24, the Division projects 6.1 per cent economic growth for FY21, up from 5.2 per cent in FY20.
And despite the slowing pace of the private sector credit growth and the falling import of capital machinery, the MTMPS maintains that both public and private investment grew in FY21 than a year earlier as a percentage of gross domestic product (GDP).
The claims have drawn flak from economists and private think-tanks since Finance Minister AHM Mustafa Kamal tabled the national budget for the next fiscal year on June 3.
The Centre for Policy Dialogue (CPD) questioned the GDP growth estimates used in the MTMPS. The South Asian Network on Economic Modelling (Sanem) expressed doubts about the historically high private investment data.
“Data deficit is degenerating into data anarchy,” said Debapriya Bhattacharya, convener of the Citizen’s Platform for SDGs, Bangladesh, on Sunday.
“This kind of data anarchy leads to distorted analysis that leads to bad policy choices. And it leads to unmet demands of the people, and in the long run, it is the political leaders who will face the consequences.”
This is not the first time questions have been raised about the major macroeconomic data.
In April 2018, the World Bank questioned the 7.65 per cent economic growth estimate of the Bangladesh Bureau of Statistics (BBS) for FY18, raising doubts over claims of robust expansion of the manufacturing sector and domestic demand.
Citing the figures of GDP growth, per capita income used in the MTMPS, the finance minister’s budget speech, the BBS and the 8th Five-Year Plan, Bhattacharya said per capita income was higher in the provisional data of the finance ministry than that of the Eighth Five-Year Plan.
The Finance Division puts the per capita income at $2,064 for FY20, which is 2 per cent higher than the BBS estimate.
Bhattacharya said the per capita income for FY21 was shown at $2,170 in the 8th Five Year Plan, which was projected before the pandemic arrived. However, the number used in the budget document, the MTMPS and the BBS was $2,227.
“How can the figures of the pre-pandemic period be lower than those in the Covid-19 period?” said the distinguished fellow of the Centre for Policy Dialogue (CPD).
The same was on repeat in the projected per capita income data for FY22, where the provisional finance ministry estimate is larger than the 8FYP figure, said Bhattacharya.
It does not end there.
According to Bhattacharya, FY21 was going to be the worst year in the recent period for the economy. But GDP growth, private and public investment were shown to be higher in FY21 than in FY20.
“I have a profound doubt about it.”
The MTMPS said that the private and public investment would increase to 24.2 per cent of GDP in FY21 from 23.6 per cent in FY20.
Public investment is estimated to grow to 8.2 per cent of GDP in FY21 from 8.1 per cent a year ago.
“Public and private investment are not corroborated by the investment correlates. The indicators of many government agencies do not even support them,” Bhattacharya said.
The economist said the 6.1 per cent GDP growth projection did not consider the second wave of coronavirus.
Citing MTMPS, the Implementation Monitoring and Evaluation Division, Bangladesh Bank and BBS data, he said ADP implementation was 74.9 per cent in the entire fiscal year of 2019-20, and it was 49.09 per cent during the July-April period of the current fiscal.
The private sector credit grew 8.6 per cent in FY20. It slowed to 8.3 per cent in the first 10 months of FY21.
“Most of the indicators are showing that last fiscal year was better than the current fiscal year, and the budget is stating the opposite,” Bhattacharya said.
Projections of the international organisations have also been estimated before the second wave. However, all initial forecasts are consistently below the national estimate, he added.
He said there was no mention of the new poor and old poor in the proposed budget.
The 8th Five-Year Plan estimated that the rate of poverty rose to 23 per cent in the current fiscal year, from 18.6 per cent a year ago. This was not mentioned in the budget.
The plan said the poverty rate would stand at 23 per cent in FY21 and would come down to 17 per cent in 2024.
The budget speech said the poverty rate would be brought down to 12.3 per cent in 2024.
The surveys by the CPD, the Sanem and the Brac Institute of Governance and Development and the Power and Participation Research Centre showed that the ratio of the poor ranged from 35 per cent to 43 per cent because of the economic slowdown, Bhattacharya said.
Sanem Executive Director Selim Raihan said the private investment had been shown at a historically high level. But the incremental capital-output ratio had been falling gradually in the FY20 and FY21.
“At a time when businesses suffered losses and were trying to recover, the private investment is shown higher amazingly,” he said.
“It is seriously inconsistent,” he said, citing Sanem’s Business Confidence survey, which found that 55 per cent of firms were trying to make a comeback from the pandemic induced losses.
“Wrong data will lead to a serious disconnect with ground reality and policy-making. This will lead to half-hearted policy.”
As a result, the stimulus packages will not be properly targeted, and social protection schemes will not expand, said Raihan, also a professor of economics at the University of Dhaka.