Political unrest hurts investment, growth
Causes a loss of around Tk 4,900cr in two-and-a-half months, says CPD analysis Causes a loss of around Tk 4,900cr in two-and-a-half months, says CPD analysis
Political unrest and illiberal democratic environment in the country have dented private sector investment in recent months, said Centre for Policy Dialogue (CPD) yesterday.
The think-tank said sluggish reform activities, especially the institutional ones, have also hurt the confidence of the investors.
“A kind of discomforting environment prevails in the country,” Dr Debapriya Bhattacharya, distinguished fellow of CPD, told a news briefing at BRAC Centre Inn in the capital.
Bhattacharya added such an environment impacts the economy as investors fear they would not be able to work freely and independently.
CPD held the briefing to launch its analysis on the current and the upcoming fiscal years. Towfiqul Islam Khan, research fellow of CPD, presented a paper on the analysis titled “Navigating the Troubled Waters”.
According to the think-tank, political unrest from January to mid-March of the current year has caused a gross domestic product (GDP) loss of 0.55 percent or Tk 4,900 crore, meaning that if the country's GDP stands at 6 percent at the end of the current fiscal year, it would have been 6.55 percent if there were no political unrest.
The CPD said it is a conservative estimate as it has analysed only 11 major sectors, missing value addition worth Tk 4,900 crore due to this year's political instability.
“If it was possible to capture all sources of loss, that would obviously raise the estimate,” said the CPD budget analysis.
Informal sector was also out of this estimate, it added.
“We have assessed the loss of GDP [value addition] only, not the loss of assets,” said Prof Mustafizur Rahman, executive director of CPD.
The analysis found that the apparel sector has the highest loss with Tk 1,318 crore, followed by tourism sector with Tk 825 crore, shrimp and frozen food with Tk 741.4 crore, poultry sector with Tk 606 crore, wholesale and retail trading with Tk 448 crore and perishable vegetables with Tk 398 crore.
The other five sectors -- banking and insurance, transport, plastic, real estate and education -- have lost the remaining of the Tk 4,900 crore in GDP.
CPD also suggested that the government provide incentives to the affected sectors in the upcoming budget.
“A dedicated fund can be set up to take corrective measures to help various sectors and stakeholder groups undertake the adjustments,” it said, adding that the central bank could create a window to provide low-cost credit facility to vehicle owners.
It also asked the government to provide incentives towards supply chain management, particularly in building warehousing facility and cold storage for perishable items, among others.
In its review of the outgoing fiscal year, the CPD found that the country's economy continues to enjoy relative macroeconomic stability in the form of low inflation, manageable fiscal deficit, stable exchange rate and favourable balance of payment position despite a slide in political environment.
Falling oil prices in the international market were also helping the government save money earmarked for subsidy, it observed.
There were some downside risks as well, said the think-tank. Of those risks, shortfall of revenue by Tk 25,000 crore from the target, slowdown in remittance, falling economic growth in Europe and euro exchange rate, sluggish demand for apparel products in the US were some fault lines that affected Bangladesh's economic growth.
“Actually, revenue income did not fall, rather the target was set high,” observed Towfiqul Islam Khan.
Additional Research Director Khondaker Golam Moazzem, among others, also spoke at the programme.