Decent GDP growth amid extraordinary circumstances

In the end, the final data from state-run Bangladesh Bureau of Statistics (BBS) shows the economy grew at a respectable 5.2 per cent last fiscal year, when large swathes of the global economy plunged into recession for the outbreak of coronavirus from Wuhan, China.

The Washington-based multilateral lenders -- the World Bank and the International Monetary Fund -- forecasted that the economy would grow between 1.6 per cent and 3.8 per cent in fiscal 2019-20 for the pandemic-whiplash, while the Asian Development Bank said the Bangladesh economy would expand at 4.5 per cent.

But, the economic locomotive of Bangladesh appears to have outpaced all projections.

Finance Minister AHM Mustafa Kamal credited the GDP growth rate to the uninterrupted economic activity before the onslaught of the coronavirus.

"Our economy was growing normally in the first seven months of the fiscal year and the growth during the period was added to the economy," he told The Daily Star over the phone last night.

All the broader sectors -- agriculture, industry and service -- expanded, albeit at a slower pace, showed data from BBS.

"We had projected 8.2 per cent growth but we achieved 5.2 per cent. A lot of difference has been caused by the pandemic," he said.

This, however, is the lowest GDP growth rate in 11 years.

Zahid Hussain, a former lead economist of the World Bank's Dhaka office, remains sceptical about the BBS figures that were released yesterday.

"It is very difficult to construct a credible narrative of fiscal 2019-20's GDP growth based on the details provided by the BBS. It appears that the BBS has not used all available data in preparing the preliminary estimates."

However, this time the preliminary estimates could have benefitted from the availability of data on the key GDP components for the whole year, unlike in previous years when they had to be based on data covering the first 6-7 months.

In fiscal 2019-20, the industrial sector bore the most brunt among the broader sectors as the pandemic forced the government to close factories to tame the rogue virus.

It slowed by half from the previous fiscal year to expand at 6.48 per cent. The service sector grew 5.32 per cent, in contrast to 6.78 per cent a year earlier.

The agriculture sector's growth slowed to 3.11 per cent, 81 basis points less than in fiscal 2018-19, according to constant prices data of the BBS.

Constant prices enable measurement of the actual change in output regardless of inflation.

Within the agriculture sector, the agriculture and forestry sub-sector slid 1.07 percentage points to end the year at 2.08 per cent. The fishing sub-sector grew at 6.10 per cent, sliding 11 basis points.

The manufacturing sector gave up 8.36 per cent to end the fiscal year at 5.84 per cent, which was 14.20 per cent earlier.

Large and medium-sized industries grew 5.47 per cent because of the collapse in demand at home and abroad. Small industries lost 3.37 per cent to grow at 7.78 per cent.

The electricity, gas and water supply sub-sector fell to 6.16 per cent from 9.58 per cent in the previous year.

Within the service sector, wholesale and retail trade expanded 5.02 per cent, down from 8.14 per cent.  As people chose to stay at home in the initial days of the coronavirus breakout, hotels and restaurants paid a heavy toll as they grew 6.46 per cent against 7.57 per cent a year earlier. The transport, storage and communication sub-sector lost 1 percentage point to fall to 6.19 per cent.

Land transport grew by 6.43 per cent in contrast to 7.06 per cent a year earlier. Water transport edged up by 3.42 per cent from 3.63 per cent and air transport's growth slowed to 4.61 per cent from 6.37 per cent a year ago.

Because of the economic shutdown, the financial sector paid a heavy price as it grew by only 4.46 per cent, which was 7.38 per cent a year ago.

The growth of real estate, renting and business activities fell to 4.85 per cent, which was 5.23 per cent a year ago. 

Because of the subdued growth, the share of agriculture to   GDP fell to 13.35 per cent from 13.65 per cent and that of the service sector declined to 51.30 per cent from 51.35 per cent.

The share of the industrial sector, however, went up to 35.36 per cent from 35 per cent.

The latest numbers raised a few questions from economists.  

"It is amazing that the GDP estimate has remained invariant to new data," Hussain said.

The 5.2 per cent growth estimate made before the budget, based on incomplete data, has not changed even though the country has data on agricultural production, exports, imports, tax revenue, credit and other areas for the whole year. 

There are also various survey data on the post-coronavirus income and expenditure that could be used to check the consistency of the estimates arrived at based on the standard procedures the BBS uses to estimate the GDP in a normal year.

There are several inconsistencies in the estimates provided, he said.

Manufacturing contributed 2.2 percentage points to a total of 5.24 per cent growth. Large-scale manufacturing contributed the most, adding 1.35 percentage points. However, the contribution of exports to GDP growth was a negative 1.33 percentage points. 

Large and medium-scale manufacturing dominates exports. Then growth must have come from domestic market-based manufacturing.

However, the import of intermediate goods declined 6.6 per cent. 

It is widely known that the production of cement and steel was hit hard due to the disruptions caused by the virus. 

"What then underlies the 5.84 per cent growth in manufacturing?" Hussain questioned.

Services growth is estimated at 5.32 per cent but this is the hardest hit sector due to the sudden stop of the economy caused by the virus. Yet, it is estimated to have made the highest 2.6 percentage point contribution to growth. 

"Contributions within the sector are fairly broad-based with the highest contribution from the transport sector. This is hard to reconcile with what happened in the economy during March-June," Hussain added.

The finance minister, however, said the service sector, which accounts for more than half of the economy, came under some pressure after coronavirus arrived on the shores of Bangladesh.

"The service sector was affected in the initial days. Afterwards, it was almost as usual."

A record amount of remittance flowed to Bangladesh, giving people in the villages the money to spend, Kamal said, adding that revenue generation was almost the same in the last fiscal year from a year earlier.    

In fiscal 2019-20, migrant workers sent home a record $18.20 billion in remittance.

Revenue generation stood at Tk 218,406 crore in fiscal 2019-20, down from Tk 223,462 crore a year earlier. The per capita income rose to $2,064 last fiscal year from $1,909 a year earlier, BBS data showed.