The worst fear of the business community in Bangladesh has come true as the central bank has cut its growth forecast by more than one percentage point to around 6 per cent for the current financial year because of the prolonged phase of political unrest between October and January.
The projection is in line with the recent reports of the World Bank, IMF and the Asian Development Bank, which had pegged economic growth between 5.7 per cent and 5.8 per cent.
The forecast for the fiscal year that began in July was cut from 7.2 per cent, made in the budget tabled last June.
“Economic activities and normal routines of daily life were disrupted substantially,” Reuters quoted Atiur Rahman, the governor of the Bangladesh Bank, the central bank, as saying after he revised the growth forecast early last week.
Economic activity in Bangladesh was severely hit between July 2013 and January 2014.
The country witnessed 55 hartal/blockade days as the BNP-Jammat-led Opposition hit the streets to force the Sheikh Hasina Wazed government to step down and hold polls under a caretaker government.
According to a recent report of the Centre for Policy Dialogue, a Dhaka-based think tank, four key sectors — land transport (road and rail), agriculture and agro-based industries, export oriented clothing and textiles and tourism — suffered huge losses because of the political unrest that slammed the brakes on economic activities.
“The total amount of loss is estimated to be Tk (taka) 49,017.92 crore, which is equivalent to 4.7 per cent of GDP in 2012-13. One important sector, which was hit hard, is the small production and businesses. Regrettably, we could not acquire sufficient data to capture losses encountered by these sectors,” the report said.
Although the report has put a figure to the quantum of losses, it also makes it clear that the number is partial, which suggests the actual losses could be much more.
Not just the losses during the last few months’ political unrest, the future of the Bangladesh economy — growing at 6 per cent-plus rate over the last few years — is a concern as the World Bank said in a report that the economy was entering a more “volatile phase”. The reason behind the volatility is the refusal by the two main political forces — the Awami League and the BNP — in the country to resolve their differences through a process of dialogue.
In the run-up to the January 5 elections, which the BNP boycotted, the two parties refused to be drawn into a dialogue despite repeated attempts by the business community.
The uncertainty looms large even after the election as the BNP has called the polls a farce and vowed to force Hasina to step down.
“The biggest casualty of such unrest is industry, which will affect the economy…. This cannot go on. We are urging both parties to find a solution through dialogue,” said Mohammad Ali, president of the Indo-Bangladesh Chamber of Commerce and Industry.
According to him, Bangladesh is already saddled with an entire gamut of problems, ranging from lack of proper physical infrastructure to dearth of human resources, to fuel economic growth and prosperity.
A look at some of the macroeconomic indicators reveals that all is not well with the Bangladesh economy though export earnings continue to rise, keeping a favourable balance of payments position.
But political unrest in the last few months has pushed up prices of essential commodities. Non-tax revenue collection has lagged behind targets, which will affect the government’s spending abilities. The volume of remittances — the country receives remittances of around $17 billion a year — from the expatriate community has also dipped in recent months.
“The year 2013 was really bad for us…. We can only hope that things will improve in the coming year,” said Md. Helaluddin, vice-president of the Federation of Bangladesh Chambers of Commerce and Industry.
The business community met Hasina recently and rolled out a long wish list — four-laning of the road between Dhaka and Chittagong, another road on PPP model between the capital and the port city, an interest rate cut and various other sops — to recover the losses because of political uncertainty.
“We know that the present situation is not ideal…. But we think that we can stage a comeback and recover all the losses, provided the two political parties end the impasse through a dialogue,” Ali said.