The global lender cuts growth projection to 5.6pc from 6.6pc

World Bank country director for Bangladesh, Bhutan and Nepal Johannes Zutt speaks at a briefing in Dhaka on Sunday while presenting Bangladesh Development Update-2015. WB lead economist Zahid Hussain is also seen.

The country lost one per cent or Tk 17,150 crore of its gross domestic product due to the political unrest and violence during January to mid-March that dampened the economic growth potential in the current fiscal year, the World Bank said in its report Bangladesh Development Update-2015 published on Sunday. The World Bank also downsized the country’s economic growth projection to 5.6 per cent for the current fiscal year due to the impact of political turmoil from that of 6.1 per cent in last year. ‘Direct production losses inflicted by the turmoil could be around one per cent of the GDP or $2.2 billion (Tk 17,150 crore),’ the report said. Bangladesh’s economic growth could have been 6.6 per cent in absence of such turmoil, it said adding that political turmoil in particular was taking a heavy toll on the economy. The World Bank revealed the findings at a press briefing held at its Dhaka office on the day. The WB also said that the GDP growth might recover to 6.3 per cent in the next fiscal year and 6.7 per cent in the FY17 on political stability coupled with sound fiscal and monetary management. ‘Economic losses this time are likely to be more severe than earlier period of turmoil in 2013 because of the timing, duration and the depth of uncertainty,’ WB lead economist Zahid Hussain said at the briefing. Earlier, the WB estimated that Bangladesh suffered a financial loss of around Tk 11,000 crore due to the 2013 political unrest centring national elections. Zahid said that this year the intensity of violence was severe as violence occurred in dry season, a season for construction works, tourism, retail sales and peak time for production. He said that the services sector including trade and transport sub-sectors were affected most followed by the manufacturing sector and agriculture due to the political unrest. Of the Tk 17,150 crore economic losses, the services sector incurred the highest 68 per cent or Tk 11,662 crore loss while the agriculture sector lost the lowest 7 per cent or Tk 1,200 crore, according to WB estimation. The manufacturing sector suffered an economic loss of Tk 4,288 crore or 25 per cent during the unrest, Zahid said. Earlier on April 5, country’s leading independent think-tank Centre for Policy Dialogue said that the country lost 0.55 per cent or Tk 4,900 crore of the gross domestic product due to the recent political unrest. ‘Bangladesh economy is moving forward with resilient growth and macroeconomic stability despite political turmoil, structural constraints and global volatility,’ the WB said. According to the WB report, continued polarisation between the government and the opposition alliance is the main source of uncertainty in the country. The country will need to restore political stability and implement faster structural reforms to capitalise the projected recovery in global growth particularly in the United States and the eurozone, and continued softness in the international commodity prices. It, however, said that political instability was not the only challenge for the country for economic growth at higher rate. Bangladesh needs to increase investment by at least 5 percentage points to the GDP from the current 28.7 per cent and improve the female labour force participation rate from the existing 33.7 per cent to get out of the 6 per cent growth trap, it said. ‘Economy will experience 1.8 per cent additional growth a year if Bangladesh can increase female labour force participation to 82 per cent, equivalent to male labour force participation in the next 10 years,’ Zahid said. The reasons for the trap are stagnation in productivity growth and female labour force participation in formal economic activities, it said. This requires faster progress on easing barriers to women’s participation in economic activities, establishing special economic zones, adequate attention to the private sector regulatory environment, better functioning of land markets to ensure the availability of land for manufacturing enterprises and addressing the transport problem for ensuring growth. Zahid said that the economic losses due to the political stalemate might not be reflected at the end of the year due to limitations in the GDP calculation methods used by the Bangladesh Bureau of Statistics. The methods used by the BBS, like most other developing countries, to estimate production and expenditures work well in a normal year but fail to capture the impact of disruptions in an abnormal year, he said. In reply to a question regarding the probable size of the next national budget, he said that the budget at Tk 3 lakh crore might be an ambitious one but it could not create any problem in management as the government usually revised the major projections including the annual development programme and revenue mobilisation. WB country director for Bangladesh, Bhutan and Nepal Johannes Zutt spoke, among others, at the briefing.