Record GDP growth despite challenges

Bangladesh’s GDP ultimately grew at a record 8.15 percent in fiscal 2018-19 -- 2 basis points higher than earlier estimates -- smashing the 7.8 percent target set for the fiscal year back in June 2018.

The higher-than-expected growth came in spite of headwinds from slowing exports and drying banking sector liquidity.

The development not only marks the economy breaking into the 8 percent growth territory after years of 6-7 percent growth, it makes Bangladesh the fastest growing nation in the Asia Pacific region, as per Asian Development Bank’s earlier forecasts.

The figure also surpassed the World Bank’s forecast of 7.3 percent for the year.

In fiscal 2017-18, the GDP grew at 7.86 percent.

The strong growth recorded last fiscal year was down to higher contribution from the manufacturing sub-sector: it increased from 22.85 percent to 24.08 percent.

The share of industry to GDP increased from 33.66 percent in fiscal 2017-18 to 35 percent.

But the contribution to agriculture declined: from 14.23 percent to 13.65 percent, in what can be viewed as a worrying development.

“Consistency of the growth estimates with high frequency growth-related indicators remains an unresolved puzzle,” said Zahid Hussain, former lead economist of the World Bank’s Dhaka office.

In another uneasy news, investment, which keeps the growth engine of an economy chugging along nicely, increased only slightly and still a far off from the requisite level.

The investment to GDP ratio now stands at 31.57 percent, up from 31.23 percent in fiscal 2017-18.

Private investment increased from 23.26 percent to 23.54 percent and public investment from 7.97 percent to 8.03 percent.

“Explaining the rise in private investment rate when private sector credit growth declined from 16.9 percent in fiscal 2017-18 to 11.3 percent in fiscal 2018-19 is yet another challenge for analysts and observers,” Hussain said.  Bangladesh’s per capita gross national income (GNI) jumped more than 9 percent to $1,909 last fiscal year from $1,751 a year ago, as per the final figures unveiled yesterday by Planning Minister MA Mannan.

The GNI is the sum total of all income of a country’s residents and businesses including residents abroad while GDP takes into account domestic production only.

The per capita GDP also rose at the same pace to $1,828 last fiscal year from $1,675 the previous year.

The per capita GNI was $120 in 1972 and it took a decade to double to $240 in 1982. It added only $80 to $320 in the next decade until 1992. 

The per capita GNI has been rising constantly alongside the country’s economic growth since the new millennium.

The per capita GNI rose by 124 percent to $940 in the decade to 2012 and more than double to $1,909 in the next seven years.

The GNI per capita is highly associated with the quality of life of citizens.

However, in terms of taka, the GDP per capita increased 11.68 percent year-on-year to Tk 1.54 lakh and GNI per capita 11.58 percent to Tk 1.60 lakh.

Mannan attributed the discrepancy to the weakening of the taka.