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.
At Budget, the government claimed that the GDP grew by 6% in 2009-10, and forecasts for 2010-11 and 2011-12 were 6.7% and 7.2% respectively.
The 2009-10 number was disputed. Preliminary BBS data suggested GDP growth of 5.5%. For this, the statisticians were publicly rebuked by the Agriculture Minister (conspiracy, evil quarter). Since in 12 of the past 15 years, the BBS had revised GDP downwards, on average by 0.06 of a percentage point, chances are that 2009-10 number was well short of 6%.
But for now, the 6% number is the ‘official truth’.
Turning to forecasts, I explained here that the government’s forecasts have typically been optimistic, while the IMF’s been pessimistic.
This continues to be the case. The IMF’s latest World Economic Outlook imply that the Bangladeshi economy grew by 5.7% in 2009-10, while the forecasts are for 6% growth in 2010-11 and 6.5% in 2011-12.
The Fund usually doesn’t devote more than a sentence to Bangladesh, and sometimes not even that (no, this is not because they are an ‘evil quarter’, it’s because in the scheme of things, we really don’t matter much). The ADB on the other hand regularly publishes pages.
The ADB accepts the government’s claim of 6% growth in 2009-10. But they are not as optimistic as the government for 2010-11, with forecast of 6.3% growth.
The ADB has some interesting observations about the garments sector:
Bangladesh stands to gain if the People’s Republic of China sheds some part of the readymade garment market because of its rising laborcosts. In addition, if the government’s plans for improving power andgas supply and transportation facilities come to fruition—and so takeoff some of the costs that the industry currently has to shoulder—thecompetitive edge of Bangladesh vis-à-vis other developing-country producers in this market segment will be honed.
They also list a number of downside risks to the 2010-11 forecast: waning recovery in the US and Europe could hurt exports, power crisis could constrain growth, and there could be political instability or natural disaster.
All in all, the economic boat should sail steadily.