Bangkok (UN Information Services) – The Bangladesh economy is expected to maintain recent growth levels of around 6.5 per cent in 2008, with the government forecasting a target as high as 7.0 per cent, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific, ESCAP says growth in 2007 stood at 6.6 per cent despite political uncertainties although agriculture reported slower growth.
“The 2007 expansion was propelled by higher growth in the industrial and services sectors. Industrial growth was broadly led by continued domestic demand and buoyant external demand,” ESCAP said.
ESCAP said the interim-government’s anti-corruption drive was also expected to improve the country’s business environment over the coming years, drawing in foreign direct investment and supporting future growth.
Severe floods through July to September 2007 led to considerable human distress as well as damage to infrastructure and immediate economic dislocation. But ESCAP said the Bangladesh economy has developed resilience to such calamities with authorities improving their ability to respond to such disasters.
But ESCAP added the government was expected to increase spending on restoring health, sanitation, and water and rehabilitating the damaged infrastructure. As a result the budget deficit is expected to increase in 2008.
ESCAP says a concern remain about the outlook for inflation which remained steady at 7.2 per cent in 2007, underpinned by supply-side constraints, political and market uncertainty and strong aggregate demand.
A key factor in lifting local demand lay in heavy remittance payments in 2007. “Workers’ remittances rose to nearly $6.0 billion and in 2007 Bangladesh exceeded slightly its 2006 current account surplus of about 1.0 per cent of GDP,” ESCAP said.
Domestic public debt remains a “serious problem”
But ESCAP, in a wider reference to the South Asia region, warned that public debt remains a “serious problem”, especially domestic public debt. “High domestic public debt pushes up interest rates and crowds out private investment, which is much needed to promote economic growth,” ESCAP said.
In Bangladesh, public debt has stabilized below 50 per cent of GDP in recent years. The real burden of public debt is in its servicing. In Bangladesh, interest payments alone consumed about 18 per cent of government revenues in 2006, more if repayments of principal are included.
In order to address the debt issues, ESCAP calls for the vigorous pursuit of policies that promote growth, the strengthening of tax administration to overcome low revenues due to inefficient tax systems.
ESCAP said given the issue of widespread poverty the demand for public spending remains high. “The challenge for governments is to contain wasteful public spending and orient it towards priority sectors. Public expenditure should promote pro-poor growth: basic services, such as education, health, sanitation and housing should be a priority.”
Agriculture’s revitalization key to reducing poverty
ESCAP, in a wider view of the Asia Pacific region, said efforts to reduce poverty especially in the rural areas required the promotion of productivity in the agriculture sector. The rural poor account for some 70 per cent of the poor in the Asia-Pacific region.
“Agriculture appears to be neglected, even though it still provides jobs for 60 per cent of the working population and generates about a quarter of the region’s gross domestic product (GDP).”
But ESCAP says growth and productivity in the sector have slowed and the green revolution appears to have by-passed million. “In South Asia, growth in agriculture dropped from 3.6 per cent in the 1980s to 3.0 per cent in 2002-2003.”
ESCAP said that by raising the average agricultural productivity across the region some 218 million, a third of the region’s poor, could be taken out of poverty. It also noted that “large gains in poverty are also possible through comprehensive liberalization of global agricultural trade, which could lift a further 48 million people out of poverty in the region”.
The policy focus needs to be on revitalizing agriculture. This, ESCAP said, requires connecting the poor to markets through improvements to rural infrastructure, the availability and management of water, agricultural technology, increasing the capacity to adapt technologies, and speeding up diversification and commercialization.
ESCAP says improving land distribution and access to credit and extension are also important, as well as making macroeconomic policy “friendlier to agriculture, all enabling the poor to make a dent on poverty by themselves”.
It also called for support for those looking to shift from agriculture to industry and services, whether it is still in rural areas or by way of migration to the cities.
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052