CPD casts doubt on economic growth data for FY20

The Centre for Policy Dialogue has called into question the credibility of the provisional data used by the government to arrive at 5.24 percent GDP growth in FY20 in light of the coronavirus pandemic's devastating impact on the economy.

In its reaction to GDP data released by the Bangladesh Bureau of Statistics, the think-tank said the numbers did not capture the pandemic's impact on the economy in FY20.

Under the circumstances, it highlighted the "heightened importance" of credible estimates of GDP amid the pandemic as it has significant implications for economic policymaking at a crucial time.

The government had initially set a target of 8.2 percent GDP growth but it was later revised down to 5.2 percent by the finance ministry in the budget, considering the economic ramifications of the global pandemic.

But that too was an outlier compared to other independent estimates, with the CPD itself projecting a GDP growth of 2.5 percent at best for Bangladesh in FY20.

Although the provisional GDP numbers are usually released in May of a fiscal year, that was not the case this year as the country was under a lockdown over the coronavirus epidemic.

The BBS released the estimates on Aug 10, taking into account data for about nine months from July 2019 to March 2020, according to the CPD.

"This implies that the provisional GDP estimates could not capture the significant adverse impacts of the COVID-19 pandemic."

The CPD has previously warned that sectors such as manufacturing, construction, hotels and restaurants, transport, storage and communication and community, social and personal services were likely to be the hardest hit in this period.

However, the construction sector did not see a significant slowdown in growth from the year before, dropping by 1.19 percentage points in FY20, according to government data. Meanwhile, the manufacturing sector was struggling even before the pandemic struck, the CPD pointed out.

The data for the services sector, including hotel, transport and real estate, did not depict any significant tail-off either in comparison with FY19, leading the think-tank to question if the 'resilience' was by design.

CPD also noted that despite the pandemic, private investment increased to 23.63 percent in FY20, a notable growth from 23.54 percent in FY19.

"A rise in private investment is indeed unexpected when the entrepreneurs have been struggling to keep the existing production capacity fully operational."

Overall, investment as a share of GDP increased to 31.75 percent in FY20, from 31.57 percent the year before.

According to CPD, more than half of the provisional GDP estimates are not based on credible real-time data. It urged the government to take urgent steps to generate credible and updated data.

"The provisional estimates of GDP significantly rely on budget data from the government -- a large part of the budgetary allocations remains unspent and undermines GDP data quality."

As such, these estimates should not inform policymaking in the coming months as it does not provide a reliable assessment of the actual health of the economy, which, the government data indicates, was already losing steam even before the pandemic, it said.

"The government must appreciate the value of data integrity. Policymakers need to acknowledge that credible and up-to-date data provides a strong foundation for sound and effective policymaking."