Bangladesh: GDP growth

BBS Projects 6.86pc GDP rise in FY06

The country may strike the highest-ever GDP growth of 6.86 percent this fiscal year thanks mainly to a strong performance of the agriculture sector, according to a preliminary estimate of the Bangladesh Bureau of Statistics (BBS).

The BBS made the estimation based on the data of the first half of FY06. Although the BBS previously used to make the yearly forecast on the basis of data of the first three quarters, this time it made it earlier as part of its drive to develop a system of making quarterly economic growth projections.

The estimate will be tabled at the current session of parliament as well as sent to the Bangladesh Bank to assist it in its policy review, said a planning ministry source.

The average level of annual GDP growth was around 3 percent in the 1970s, 4 percent in 1980s and 5 percent in 1990s. The highest annual GDP growth so far has been posted in FY04 at 6.27 percent.

The BBS also has made an upward revision of its GDP growth calculation for FY05 from 5.38 percent to 5.61 percent.

Agriculture contributes 17 percent to the GDP (gross domestic product). The BBS projects a 5.01 percent growth in agriculture in FY06, which was as low as 0.78 percent in FY05, due to the devastation by severe flooding.

This year's aaush production has been 17.45 lakh metric ton (MT), up by 16.03 percent from that in the previous year.

The aman production has been projected at 1.10 crore MT, 12 percent more than FY05's. Because of the flooding, aman production in FY05 was only 98 lakh MT, down by 15 percent from FY04's.

The projected boro production in FY06 is 1.40 crore MT, 1.18 percent more than FY05's.

Industries that contribute about 27 percent to the GDP may achieve an 8.98 percent growth this year.

Among the industries, the manufacturing sector accounts for almost 17 percent of the GDP. This year, large and medium industries are estimated to score a 9.2 percent growth, which was 8.2 percent in FY05. Small industries are reckoned to grow by 8.8 percent in FY06. The rate was 7.9 percent in FY05.

According to the BBS projection, food, knitwear, cotton, textiles, leather, pharmaceuticals, cement and plastic industries will see substantial growth this year. It estimates the construction sector to witness an 8.96 percent growth in FY06, which was 8.76 percent in FY05.

The gas production will grow this fiscal year by 9.14 percent, which was 8.87 percent in FY05.

However, the bureau reckons the power sector's growth will go down from 8.58 percent in FY05 to 8.07 percent.

Bangladesh Institute of Development Studies Research Director Zaid Bakht said the estimated growth of the BBS is probable, as it largely based on the agricultural growth, mainly in the aman production.

Over the last two years the import of capital machinery as well as the industrial credit has seen a substantial rise, so the industrial production this year will also rise, he observed.

Zaid however pointed out three risk factors. Firstly, the World Bank and the International Monetary Fund (IMF) have been pressurising the government to adjust the domestic oil prices with the international ones. Though the government so far has managed to avoid their insistence, it may not succeed to do so for long. And if the government goes for any further upward adjustment of oil prices it may have a negative impact on the economy, particularly on the boro production.

Secondly, Zaid said, there is an uncertainty in the export sector. If export does not pick up in the coming months the GDP growth may fall short of the estimate.
Thirdly, the political situation in the last half of this fiscal year may become volatile and slow down the economic growth, he told The Daily Star.

On a query on the probable impacts of the ongoing controversies over the Election Commission, he said the government should not do anything that would heat up the political situation and ultimately affect the economy.