The government will need to accelerate economic growth to about 10 percent from the present 7.86 percent, expand exports, and stimulate investment to turn Bangladesh into a middle-income country by 2021, a leading chamber said yesterday.
“Bangladesh has plenty of opportunities to achieve these goals,” according to the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI).
The government should take into consideration both domestic and external risks for a sustained revival of investment and growth in the medium term, it said. The MCCI said the government would need to improve road and rail infrastructure, develop port facilities and increase power and gas production.
Impediments like delays in execution of development projects, lack of skilled workforce and insufficiency of industrial land should be removed, it said.
“Policymakers should take careful note of significant downside risks, both domestic and external, to a sustained revival of the country's investment and growth prospects in the medium term,” the chamber said in its review of the economic situation for the October-December period of 2018.
According to the review, the domestic risks relate to the government's ability to keep current and planned reforms from going off-track and to maintain fiscal discipline. Stalling or reversal of policy reforms could see significantly lower investment and economic growth. The domestic challenges which could complicate the situation further are fiscal slippages and rising inflation as well as delays in structural reforms to address balance sheet issues in the banking and non-financial corporate sectors.
“High levels of non-performing loans in the banking sector could impede a pickup in investment if left unaddressed,” said the chamber.
It said large fiscal deficits, inability to maintain fiscal discipline, low tax-to-GDP ratios, and weak capital spending are some of the key risks that a developing country like Bangladesh could seldom ignore. The financing of public-private partnerships also remains a challenge.
“Other downside risks like the problems of poor governance, corruption in administration, labour indiscipline, and high cost of credit are also major impediments to investment and growth in Bangladesh,” it said.
The review said exports, imports and remittances may rise if the current peaceful political situation continues to prevail in the coming days.
It said the foreign exchange reserve would somewhat fall in January and March, a regular annual feature as payments are made to the Asian Clearing Union for imports. The rate of inflation is likely to go up from January because of the probable rise in some essential commodities, including fuel, said the chamber.
According to the MCCI, the overall economic situation in the country was positive in the last quarter of 2018 as indicated by steady improvements in the major economic indicators.
The economy is progressing well, despite the presence of some risk factors such as marginal growth in remittances, slower growth in export receipts and a lower rate of investment, especially foreign direct investment (FDI), it said.
During the second half of the year, the agriculture sector performed well, but continuous government support with inputs and finance will be needed to sustain the sector's growth, said the chamber.
Infrastructure deficits and gas and power supply problems were undermining the performance of the manufacturing sector, it added.
“The government will, therefore, need to adopt suitable measures to remove these bottlenecks in order to support the growth of the country,” said the MCCI.