Growth forecasts: ADB vs the Budget

Updated: 4 July 2012, 1213 BDT: Export growth chart over the fold.

The last post on the subject showed that the difference between the ADB’s and the government’s growth forecast is now at its widest in the last decade.  While the government expects the economy to accelerate sharply in 2012-13 (FY13) to 7.2% (the thick red line in the chart), the ADB expects a slowdown to growth of 6% (thick red dots). 

There seem to be two major reasons why the forecasts diverge — one explicit, and one implicit.

Growth forecasts in 2012-13 Budget

Mr Muhith brought down his fourth budget last week.  For his first three budgets, I published a number of articles with my erstwhile Drishtipat colleagues (note to self: set up an archive of published analysis).  These days, I prefer to focus on the blog.  So instead of writing op eds for the Daily Star or BDnews24, I’ll do a number of posts over the next few weeks.  Dear reader, this means I am writing exclusively for you. 

The typical analysis of the Budget one sees in the media does not look at the past performance. And yet, analysis of how the government’s previous Budget forecasts turned out is a good way to judge the current forecasts.  Using a set of charts, this post focusses on the government’s successive forecasts of GDP growth.

Economic outlook — Autumn 2011

In the past few weeks, the IMF, the ADB and the World Bank have released their latest outlook for the Bangladesh economy — major risks notwithstanding, the economy is expected to grow steadily in 2011-12. 

Details over the fold.

ADB is optimistic

In its latest outlook on the Bangladesh economy (available halfway through this), ADB expects the 2010-11 (FY11) growth of 6.3%, not as bullish as the 6.7% that underpins the FY11 Budget, but unchanged from ADB’s own forecast from a year ago (halfway through this).  That is, despite the power shortage, sharemarket crash and risks around remittances, ADB hasn’t changed its view about the FY11 prospects.  And on top of this, the outlook for 2011-12 (FY12) is an acceleration to 6.7%.

These are strong endorsements of Bangladesh’s economy.  The 1/11-induced slowdown and the impacts of the global financial crisis seems to be finally behind us.  And what is behind this resilience?  Short answer: exports.  Over the fold, detailed discussion.

Bangladesh’s economic outlook into 2011

The Finance Minister met econojournalists in Dhaka yesterday. 

He admitted that inflation is on the rise: The apprehension over inflation persists. I spoke to the agriculture minister and the food minister in this regard. I hope we’ll succeed in containing it.  At least he accepted the reality, instead of blaming the anti-liberation forces (aka BNP) for it. 

Well, to be sure, he did have a conspiracy theory of his own.  He bizzarely claimed that the recent report titled State of the World Population 2010  by the UN Population Fund is ‘unauthorised meddling’ by ‘evil quarters’.  Someone should remind the Finance Minister that believe it or not, international agencies don’t need his permission to write annual reports.

He also claimed that new transit fees imposed from this fiscal year for Indian vessels using Bangladeshi rivers follow international practices, contradicting Dr Mashiur Rahman, the Prime Minister’s economic advisor.  I look forward to the Minister convincing his boss so that the fees can be collected.

He also claimed that we are likely to be experiencing an investment recovery this year, implying that the economy is on track to meet the government’s forecasts for 2010-11.  And we can be cautiously optimistic that he will be right.