The country may not be able to achieve 7 percent average economic growth in the final two years of the Sixth Five Year Plan due to sluggish investment, a government review report said yesterday.
Shamsul Alam, member of general economics division of the planning commission, presented the report on the country's achievements in the first three years of the Sixth Five Year Plan (for fiscal 2011 to fiscal 2015) at the National Economic Council in Dhaka.
Real GDP growth was 6.7 percent in fiscal 2011, the first year of the plan, meeting the target. It was followed by 6.3 percent and 6 percent economic expansion in the following two fiscal years, but falling short of targets.
"On the whole, the average GDP performance in the first three years is solid, but lower than the target in the plan," Alam said.The economist said slow recovery in the western markets affected export growth as expected.
"While domestic political stability has returned and there is likely to be a recovery in private investment, on the whole, it is clear that the investment targets in the plan may not be achieved."
The investment-GDP ratio stood at 26.8 percent in fiscal 2013, against a target of 29.6 percent.
In the first three years, 63 lakh jobs were created by the government, he said.
Alam urged the government to improve the investment climate by removing the constraints.
“The shortfall in public investment needs to be addressed speedily with a range of measures, including more focused and steady implementation of the tax modernisation plan and proper pricing of electricity.” In Bangladesh, getting an electricity connection requires 185 days as per the Global Doing Business report. "This issue should be addressed," Alam said.
Almost in all macroeconomic indicators, Bangladesh has been on target in the first three years of the Five Year Plan.
In fiscal 2013, the tax-GDP ratio was 11 percent against a target of 11.2 percent. The fiscal deficit stood at 4.4 percent of GDP against a target of 5 percent and the export-GDP ratio was 20.2 percent against the 22.1 percent target.
Remittance brought home $14.3 billion against a target of $14.2 billion and the foreign currency reserves could finance five months of imports, whereas the target was to amass foreign reserve that could meet three months of imports.
Only the inflation target could not be reached as it stood at 7.7 percent against a target of 7 percent.
The plan, however, targets to bring inflation down to 6 percent at the end of the programme. "This requires continuous monitoring and management," Alam said.
AHM Mustafa Kamal, planning minister, who chaired the meeting, said no indicators suggest that Bangladesh is lagging behind any of its targets.
Atiur Rahman, governor of Bangladesh Bank, said the country has achieved quality GDP growth as it cut poverty and has not widened inequality.
"We did not expect the export sector to perform so well, as trucks could not ply the roads and even small shops could not be opened for five months last year."
Mustafizur Rahman, executive director of Centre for Policy Dialogue, said the country is not being able to ensure expected returns on investment.
"The Padma bridge project is being delayed, which is raising the cost," he said, adding that the cost of the project has been revised up to Tk 25,000 crore; it was Tk 10,000 crore in 2010.
AMA Muhith, finance minister, said the mid-term review is also an attempt to have a good input for the next Seventh Five Year Plan.
In many countries, there has been poverty alleviation but inequality has also gone up in many of those countries, he said.
"Bangladesh is the only country where inequality has been static from 2006 and it has been going down from 2010."
Bangladesh will have to increase the expenditure set aside for social protection as it has a great contribution to bringing down inequality, the minister said.
Mahbub Ahmed, finance secretary, said there should be no worry if inflation goes up a bit as a consequence of actions aimed at boosting economic growth.