The national budget announced by the Bangladesh government is another example of the curious disconnect between reality and the world of politics. National leaders and NGOs have voiced their disbelief over the goals and the numbers enunciated by the finance minister (FM) a few days ago, including the GDP growth rate which is set to bounce back to the 8.2 percent target set for last year.
In sharp contrast, a World Bank forecast released on June 8 expects the world economy to experience a 5.2 percent decline in GDP in 2020. The bank's projections, provided in its June 2020 Global Economic Prospects, warns that, if this dark scenario materialises, "That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870."
Against this backdrop, and in sharp contrast to the pessimistic global outlook, the FM's proposed budget for the next 2020-21 fiscal year (July 2020-June 2021) targets an economic growth rate of 8.2 percent which is exactly equal to last year's (FY20). This optimistic plan is based on the government's faith in a quick recovery following the Covid-19 reopening which started after the Eid holidays and a hope that the economy will experience a sharp "V-shaped" rebound. While many economists, including myself have put our bets on a more gradual "U-shaped" restart of the Bangladesh economy and suggested a gradual three-phase reopening, the government is counting on alternative counsel, demonstrating its impatience with the mounting toll of Covid-19 on the health of the people and its economy.
In an op-ed in The Daily Star on May 26, I voiced my concern over a hasty unplanned reopening following the Eid holidays. Prior to that, on March 18, in a piece entitled "Tough Times Ahead in the Wake of Coronavirus", we expressed the view that the indirect effects of the Covid-19 pandemic will be felt by every country since it has already slowed down global economic recovery. This group includes Bangladesh which will feel the impact of the slowdown in global trade, lack of jobs for Bangladeshis in the Middle East, and a slow recovery of international trade. We expressed our belief that the coronavirus onslaught will weigh in on the global economy and will last even after the epidemic has been brought under control, and "it won't end with a sudden burst of blue skies".
It is not clear what calculations went into the government's GDP targeting, in view of the fact that the government offices were shut down for over two months. Interministerial discussions and information exchanges between various departments have been at a standstill. According to various sources, the banking, inflation and balance of payment data have not been compiled during the shutdown period. The Bangladesh Bureau of Statistics (BBS) and the Bangladesh Bank (BB), the two major agencies tasked with aiding the government's budgetary and contingency plans had been in operational limbo during the lockdown period.
It is understandable that the government and the ruling party are still struggling to come to terms with the damage to the economy and the year-long celebration plans upended by Covid-19. This year the PM and her allies had planned major events that would have showcased our 10 years of sustained growth and a booming economy as we entered the new decade. However, there has been an over-reliance on GDP growth and other targets dependent on GDP-growth rates.
One only has to look back only one year to jog our memory. The ruling party was planning to hold many rounds of rallies, national events, and publicly-financed rounds of Centennial and Bicentennial celebrations to grab international attention, and showcase our economic growth, i.e. our journey over the last decade on the "Road to Prosperity". In this day of pain and suffering witnessed by the people during the three months of lockdown, it is worthwhile to remind ourselves of the mood that prevailed as late as March 2020.
The AL election manifesto set very ambitious economic goals, including an increase in the GDP growth rate, rapid growth in per capita income, and a significant jump in the rate of investment in the country. In the manifesto, the most important and tangible target aimed by the government is the commitment to push the growth of GDP to double digits by the end of its term in 2023-24.
The Asian Development Bank's rosy recent outlook (ADO) for the Bangladesh economy seems to have unduly influenced the government's projection of GDP growth and minimised the importance of the economic loss, for the eight months from March to December 2020 and beyond. "A planned rise in public investment in large projects should help expansion in domestic demand," said the ADO and added, "improvement in global growth with expected government policy support will help the industrial activities expand." The FY21 total budget is Tk 5,680 billion with an income of Tk 3,780 billion and a deficit of Tk 1,900 billion. However, targeting a Gross Domestic Product (GDP) growth rate of 8.2 percent for FY21 indicates that economic growth has been expected to pick up speed and the economy will experience a strong rebound. There is only one word to describe this whole exercise, "Unbelievable"!
One only has to contrast the FM's overall plan with two pieces of evidence presented below to understand the scepticism voiced all around. First, let us consider the pessimistic global GDP projections from all international institutions. Ceyla Pazarbasioglu, a World Bank vice president, cautioned in an interview about the grim global picture. "This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges." The World Bank forecast of -5.2 percent is more dire than the 3.3 percent contraction that IMF predicted in April. And it warns, a protracted pandemic that leads to a breakdown in financial markets and global trade could darken the outlook.
Secondly, Oxford University has been tracking government measures in response to Covid-19 in real-time and in about 160 countries. The Government Response Tracker (OxCGRT)project collects data on 17 indicators which represent the level of strictness of each policy in three categories: a) containment and closure policies; b) economic policies; and c) health system policies. The policies selected include school closures, travel bans, emergency investment in healthcare, fiscal measures, and investment in vaccines by the governments. The latest ratings published for four South Asian countries show that while Sri Lanka, India, and Pakistan scored a perfect 100, Bangladesh's Stringency Index measure is 95.24. In other words, Bangladesh has a few things to learn from our neighbours in terms of enforcement of proactive measures to limit the spread of Covid-19: strictly screen and quarantine international travellers, monitor commercial establishments to prevent virus spread, upgrade the healthcare infrastructure (the ratio of the number of hospital beds, ICU beds and ventilators to the population), and prioritise greater availability of healthcare professionals—doctors, hospital staff, paramedics and well-trained social workers.
Dr Abdullah Shibli is an economist and works in information technology. He is Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA.