Although businesses are reeling under the pandemic, it appears that the country's policymakers find little to worry about economic growth. They are of the view that the economy is growing despite all odds and so, according to them, it will be no wonder if the annual growth rate reached 7.4 per cent in the current fiscal. This is clearly reflected in an interview of the finance minister AHM Mustafa Kamal. Published in the Financial Express on April 11, he asserted that the economy of Bangladesh would fully rebound in the current fiscal year (FY21) and the revised GDP growth target of 7.4 per cent would also be achieved. The government has revised down the initial target of 8.20 per cent of GDP growth. He also argued that the 'government instantaneously addressed the crisis' originating from the first wave of Covid-19 in 2020 and 'began overcoming its potential adverse effects on the economy.'
PROJECTIONS VARY: Over the years, the policymakers seem obsessed with higher rate of GDP growth. So, for them, GDP growth rate becomes the prime indicator of socio-economic advancement of the country. That's why, it was difficult for them to accept the decline in growth rate in FY20 due to the pandemic.
A number of local and international organisations last year projected that growth rate would stay between 2.0 per cent and 3.30 per cent in FY20. Centre for Policy Dialogue (CPD) projected it 2.50 per cent while Policy Research Institute of Bangladesh (PRI) put it at 2.25 per cent due to the Covid-19 outbreak. At the same time, the World Bank's forecast was that economic growth would be between 2.0-3.0 per cent while the International Monetary Fund projected 3.8 per cent growth. Bangladesh Bureau of Statistics (BBS), however, in its provisional estimate showed that GDP growth rate recorded at 5.24 per cent in FY20 which was significantly lower than a record high of 8.15 per cent growth rate in FY19. BBS is yet to release the final estimate of growth and GDP for FY20 although FY21 has entered the last quarter. There is no valid reason to delay in finalising the GDP estimate for previous year when the work for preliminary estimation of the current year GDP is due.
For the current fiscal year, the WB and the IMF have projected 3.6 per cent and 5.0 per cent growth of GDP respectively. Asian Development Bank (ADB) has projected Bangladesh economy to grow by 6.0 per cent in FY21. Interestingly, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) projected that Bangladesh economy may rebound robustly in the current fiscal as GDP is likely to post 7.20 per cent growth. Bangladesh Bank, on the other hand, cautioned that the continuation of the recent trend of the new infection rate may dampen the overall economic growth. Without specifying any possible rate, the country's central bank, at the same time, indirectly hinted that attaining 7.40 per cent is not impossible if business confidence and people's mobility are restored following vaccination. CPD or PRI is yet to make any projection.
Whoever is doing the projection on economic growth, and whatever the projected rate may be, everyone is focusing on growth rate or the size of economy in terms of GDP as the ultimate goal of development. Thus, not only the country's policymakers, but also the international development organisations and financial institutions are growth-fixated.
LIMITATIONS WELL RECOGNISED: Many economists, analysts and critics around the world are, however, no more convinced that growth rate of GDP is the final yardstick to gauge the health of economy. After the outbreak of Covid-19 last year globally, the myth and obsession of GDP growth became more exposed. That's why Financial Time's (FT) chief economic commentator Martin Wolf criticised the IMF and World Bank's latest outlook of fast recovery of the world economy. In an article titled 'Economic Recovery Masks the Danger of a Divided World' he argued that "the recovery in the global economic aggregate masks what is happening to the world's people. Both within countries and among them, the disadvantaged seem set to suffer the slowest recoveries. Moreover, this house divided may not stand: what is going on - above all, the slow global rollout of the vaccines - will worsen prospects for everybody." What Wolf argued is also relevant in the context of Bangladesh where upbeat on economic recovery and return of higher growth cast shadow on the distributional aspect of growth.
The annual rate of growth reached 8.13 per cent in FY19 from 6.01 per cent in FY13. The annual average growth rate stood at 7.0 per cent in the last 10 years. Higher rate of GDP growth also contributed to increase the per-capita income, in terms of Gross National Income (GNI), to US$1909 from $1054 during the period under review. Thus per capita income is an indicator of growth distribution, but not an adequate one. In FY20, per capita GNI stood at $2,064, according to the provisional estimate of BBS. It is surprising, despite negative affect of the pandemic, per capita income increased in Bangladesh which indirectly shows that income disparity is also high. It is well known that during the first wave of coronavirus, many people lost their jobs, many small trade and informal economic activities closed down. A large part of trade and economic activities are yet to recover and many yet to resume their previous jobs. Thus all of them faced erosion of income.
UNESCAP in its flagship publication, the Economic and Social Survey of Asia and The Pacific 2021, discussed briefly the limitations of GDP and its growth as a yardstick for economic development. It mentioned that GDP is simply a limited measure of economic activity and does not capture well-being or overall societal progress, including its distribution. It also pointed out that GDP does not address environmental issues and ecological boundaries. The observations made in the ESCAP publication is nothing new but renewed concern that too much focus on GDP and its higher growth rate does not mean a country on the path of sustainable development.
ESCAP also noted that depending on the level of ambition, three approaches can be used to address the above mentioned concerns. First, it suggested the adjustment of GDP or 'finding solutions within the current system of national accounts.' This can be done by 'putting more emphasis on households and related indicators and integrating distributional information.' Second, it argued for complementing the GDP or 'going beyond the system of national accounts.' For instance, by 'estimating unpaid household activities; incorporating monetised environmental and social factors; and implementing System of Environmental-Economic Accounting (SEEA).' Finally, ESCAP solicited for replacing the GDP or 'measuring (sustainable) well-being using a dashboard of indicators.' In this connection, it also mentioned two well-known methods already in practice. One is the UNDP Human Development Index (HDI). According to ESCAP, 'it not only extends the dimensionality - simultaneous focus on GDP per capita, education and life expectancy - but also attempts to capture the diminishing importance of income with increasing GDP.' Another is the OECD Better Life Index, supplemented by an underlying framework of accounts. Though no country has fully replaced the GDP mechanism by any of the two methods, these are globally used to measure the socio-economic progress in a better manner of the nations.
GREEN GDP: ESCAP report further pointed out that Asia-Pacific countries have 'started to broaden their evaluation of economic development with more comprehensive and balanced measurements.' For instance, 14 countries in the region indicated that they had an environmental-economic accounting programme as of end-2017. An additional nine countries announced that they plan to implement the SEEA system.
In Bangladesh, the national statistical agency (BBS) in collaboration with the Planning Commission and United Nations Development Programme (UNDP) has prepared and published 'Bangladesh Environmental Statistics Framework (BESF) 2016-2030.' This is a comprehensive 'guideline, strategic action plan and integrated platform for collecting, analysing and dissemination of environmental data.' Thus the country has a framework to adopt and implement SEEA system which is popularly known as green national accounting system. No doubt, it is difficult for the developing countries like Bangladesh to move quickly due to lack of sufficient and comprehensive data. That's why the ESCAP report stressed on 'publishing timely, standardised and universally recognised statistics'.
The green accounting also requires hectic exercise which is important to understand the status of natural resources of a country and the long-term impact of the extortion of the natural resources. As a stepping stone, green accounting of a critical sub-sector or product that has profound implications on other sectors of the economy may be initiated. Later, it may be replicated for non-extractable natural resources like forestry and fisheries.
The pandemic has reinforced the necessity of going beyond the traditional approach of GDP to understand the real status of people's wellbeing. Bangladesh needs to move in a direction to rightly address the income inequality and social vulnerability issues in the long run. As obsession with GDP growth is a big barrier to move ahead, policymakers need to take some bold steps to overcome the barrier.