Dhaka – The declining private sector investment appears to be the potential risk for the economy in the coming months making the projected 7.2 percent economic growth unachievable in the current fiscal, said a civil society think thank on Saturday.“The achievements (macro level) look fragile as each achievement has hidden risks…downtrend in investment in the private sector is the key risk,” CPD distinguished fellow Dr Debapriya Bhattacharya told reporters at the CPD office.
He said the vulnerable achievements might fade way if the country faces any economic shock — both internal and external ones.
Elaborating the possible economic risks, Debapriya said, “If the (our) export faces any crisis in the global market, remittance inflow gets slower and foreign aid inflow becomes even slower that will be the big jolt to destroy the successes achieved so far.”
He identified ‘possible weaknesses in economic management with lower revenue earnings and social and political instability as another two risks that might, even suppress the previously mentioned risks. “Draining out of significant amount of fund abroad (illegal financial outflow) has turned out to be another problem,” he said.
The CPD arranged the media briefing on ‘Analytical Review of Bangladesh’s Macroeconomic Performance in Fiscal Year 2013 (First Reading).
CDP executive director Prof Mustafizur Rahman made a presentation on the topic.
CPD research head Dr Fahmida Khatun, senior research fellow Dr Khondaker Golam Moazzem, director, dialogue and communication division Anisatul Fatema Yousuf and senior research associate Towfiqul Islam Khan were, among others, present at the media briefing.
Identifying some prevailing economic weaknesses, Debapriya said the rate of revenue collection is getting slower; and weaknesses are also visible in agriculture and infrastructure sectors.
The problems, he said, like hefty borrowing from the banking sector, slower implementation of Annual Development Programme (ADP) and problems related to maintaining Balance of Payment (BoP) in the previous fiscal year (FY) faded away with the successes came at the end of last FY. “But the successes and achievements are at fragile stage.”
The CPD thinks that the performance of the economy in 2013 will critically hinge on how the political challenges facing Bangladesh at the moment are addressed in the coming months.
Any prolonged uncertainty in this context will have serious implications for the performance of the economy, it said adding that the projected 7.2 percent GDP (gross domestic product) growth is unlikely to be achieved is unlikely to surpass the growth record of FY2012.
Debapriya urged the political parties to reach a consensus for keeping the economy unhurt. “There’s a big scope to reach a consensus on economic front if not possible on political front.”
On the investment prospect, it said a combination of a number of factors, including weakening of global demand, inadequate infrastructural facilities, and constricted access to finance, increasingly dysfunctional development of administration depressed the investment outlook.
“High cost of borrowing appears to be an impediment to private investment,” the CPD said in its analysis.
Mentioning the challenges for macroeconomic management, the CPD said an additional Tk 10,000 crore may be required in the FY13 in the form of bank borrowing to replenish budgetary allocation. “Even NBR revenue collection may fall short.”
Mustafizur Rahman, while presenting the analysis, said the Finance Ministry and Bangladesh Bank should maintain sound coordination for the betterment of economy, at least for the next six months, ensuring adequate credit to private sector.
On fuel price hike, he said it would have negative impact and will hike production cost apart from reducing GDP growth of 0.2-0.3 percent.
The CPD said the government should revisit the targets set for the SFYP with regard to macroeconomic framework and sectoral targets make the necessary revisions.
On Hall-Mark credit scandal, the CPD said the Hall-Mark incident is not only a case of financial loss but also a deep dent on the confidence and trust of the customers of the bank.
(Source: United News of Bangladesh)
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