Wednesday | 15 January 2025 | Reg No- 06
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Wednesday | 15 January 2025 | Epaper

Good bye 2017 and our economy!

Published : Friday, 29 December, 2017 at 12:00 AM  Count : 474
Haradhan Ganguly
If I am asked to say on how was the economy of the year 2017 approaching to the end, I will say it was a big success. We were able to break out trap of six per cent growth and achieved a record growth of 7.23 per cent: the biggest achievement for the economy in FY 2017. That means, Bangladesh has entered the seven-plus growth zone.
But what was the grim picture of the economy in 2017? Definitely it would be our financial sectors with lack of corporate governance. Scams in the banking sectors and a rise in nonperforming loans were a great concern for the patriotic civil society and we believe even the concerned body of politics were at discomfort.
These are the reflections of weak regulation, political patronage and a lack of vision. Bad loans jacked up bank interest rates until recently inflating cost of credit and deflating investment showed up. Spread of lending rates and interest rate remained much higher in Bangladesh. The average interest spread as of last June stood at less than 5.0 per cent while the lending rates were around 10 per cent.
The lending rates usually remained lower for the agriculture sector and SMEs and higher for consumer loans. We are accustomed to call a half-full glass of milk, rather empty. We like to call spade a spade on what is going on in macro variables. Our success has maintained moderate inflation at around 5.5 per cent. The global low oil and commodity prices played a crucial role behind the moderate inflation and over conscious of Bangladesh Bank which this made the whole process smooth. Domestic food production has been praiseworthy, despite floods and excess rainfall.
Remember the economy is burdening some mega projects including project like "Padma Bridge". So due to resource transfer to these projects, achievement of social desirability's might be hampered in short term agenda. But other macro variables are hampered due to policy pursuits then they are to be addressed. For example, the Banking Companies (Amendment) Act-2017, which has allowed up to four family members to be in a bank's board of directors for nine consecutive years, will increase the fragility of the banking sector further.
Our motto and targets of macro variables functioning are clear. We want to generate productive employment, making growth inclusive, accelerating reduction in poverty rate, developing human capital and achieving Sustainable Development Goals (SDGs). Achievement of entire macro variables would be judged with our said motto.
Our rising economic growth rate since 2012-13 has been largely driven by government expenditure. But sluggish private investment and rise in public investment continued said SANEM (South Asian Network on Economic Modelling) in their recent studies.
The share of public investment was one fourth of the total investment. Investment rose marginally from 29 per cent of GDP to slightly over 30 per cent in 2017. Here public contribution occupies almost 7 per cent of the 30 per cent making the private sector's contribution slightly over 23 per cent.
Private credit has exceeded all expectations in 2017 by hitting a growth rate of almost 19 per cent from 15 per cent. But interestingly, that credit growth did not improve the share of private investment in GDP.
Where did the money go is a question particularly rife before the election which encourages the stashing away of money, money laundering or injecting money into the black money. News reports said, part of this excessive credit growth might have fueled the stock market, but that does not tell the full story. The stock index rose by 25 per cent in both Dhaka and Chittagong --- a hyper growth in capital gain that requires caution for the economy; so the ghost of 2010 does not reappear. The year witnessed a falling growth rate in exports until 2016-17.
However, it grew 6.86 per cent year-on-year in the July-November period of the current fiscal year. The prospect of rising export growth in 2018 depends on both domestic and external factors. The real effective exchange rate (BEER) is still highly appreciated compared to the country's competitors. Further adjustment in the nominal exchange rate will be obvious given the scenario of high import demand and slowdown in export and remittance growth, according to SANEM.
There is a need for necessary measures for export growth by addressing the domestic competitiveness issues as well as for product and market diversification. Economy witnessed a falling growth rate in remittance until 2016-17.
However, in July-November, it grew to 10.10 per cent compared to the same period a year ago. According to World Bank's recent projection, remittances to low and middle-income countries are on course to recover after two consecutive years of decline. This means that there is a brighter prospect for Bangladesh in 2018.
There has been surge in import of rice in recent months. Import of rice amounted to only Tk 35.70 crore in July-September of 2016-17 compared to Tk 2912.1 crore in the same period of the current fiscal year.
In the first three months of 2017-18, rice import was five times than that in the same period a year ago. Rice prices are still high and on the rise, despite imports. It is found, a 35 per cent increase in the price of rice would induce poverty to go up 0.32 percentage points.
So, we need now a rice policy with respect to production, import, supply management and strategic agreements with rice exporting countries. Despite accelerated economic growth in recent years, there has been much slower progress in poverty reduction because of slow employment generation, poor public spending on education and health and growing inequality.
2017 saw government sale of Sanchaypatra amounting to no less than Tk 70,000 crore indicating a sign of Nation's healthier saving habit. A big chunk of lower and middle class is depending on the available saving instruments for their livelihood.
So, this must be viewed as a way of social protection. Any sorts of replacement from the present state would have negative impact on savings, consumption expenditures and investments. At this national poverty level and inequality will be on the rise.
Good bye 2017. We hope 2018 will usher in a vista of inspiration that will imbibe our political will with determination to put in motion the governance in banking sectors and realize commitment to wipe out inequality.

The writer a freelance contributor







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