7.5% growth target for FY24 amid global volatility is ‘ambitious’, economists say

They doubt if the government took into account the risks of volatility in the global economy while setting the target

When Bangladesh’s economy is facing mounting pressure from multiple fronts, a 7.5 percent GDP growth target in the budget for fiscal 2023-24 appears “extravagant” to economists.

Some of them think being ambitious will bring good results, but others say maintaining economic stability considering the reality and risks should have been at the heart of the government’s agenda.

Finance Minister AHM Mustafa Kamal presented the growth target with the Tk 7.61 trillion national budget in parliament on Thursday, hoping to bring inflation down to 6 percent as rising prices of goods and services have become a major concern for Bangladeshis.

After Bangladesh posted 7.1 percent GDP growth in 2021-22 by tackling the effects of the coronavirus pandemic, the government set a target of 7.5 percent for FY23.

As the Russia-Ukraine war hit the global economy hard, the government revised the target down to 6.5 percent.

But even that target became difficult to achieve. The national statistical agency in March projected 6.03 percent growth for the outgoing fiscal year.

This is the lowest growth achieved by Bangladesh in the past 12 years, barring the pandemic year of 2020-21, researcher Khondaker Golam Moazzem pointed out.

“It means the base of growth has fallen. There are good chances of high growth in the year after the base is lowered, but such a growth target amid an unstable global economy is ambitious,” said the research director at the Centre for Policy Dialogue, a private think tank.

Revenue target increases along with GDP growth, according to him, but that has never been the case in Bangladesh.

“The situation has not changed,” Moazzem remarked, adding that the growth target was based on estimation but consistent with the conditions set by the International Monetary Fund under its $4.7 billion loan programme.

“Perhaps the government thinks the war [in Europe] and commodity prices on the international market, including fuel oil and energy, will ease.”

The researcher doubts if the government took into account the risks of volatility while setting the target. “Foreign currency reserves have reached an alarming level. I don’t think this factor was sufficiently considered.”

His advice for the government: focus on boosting the reserves.

“It is possible to pay import bills of a maximum of three and a half months with the current reserves. It’ll be difficult to import industrial raw materials.

“Investors will be discouraged if such a situation arises. Import costs will increase; it’ll be difficult to keep supply as per demand; an employment crisis will be created. Import costs will increase further if the taka depreciates against the dollar again.”

“If these negative factors were considered, the growth target would have been lower,” Moazzem said.

Dr Binayak Sen, the director general at the government-backed Bangladesh Institute of Development Studies, however, thinks being optimistic is part of development.

“The government may think the Ukraine war will not last long. I agree with the idea because the developed countries are also affected by the war.”

Pointing out that Bangladesh’s GDP growth indeed crossed 8 percent before the pandemic, Dr Sen said, “So, what’s the problem in expecting a high growth?”

The head of the think tank, however, acknowledged that Bangladesh was facing a “tough” time. “We’ll have to overcome many hurdles with a positive mindset.”

But economist Dr Ahsan H Mansur sees the target remining elusive amid global economic volatility, inflationary pressure and falling imports.

“The growth this fiscal year is estimated at 6.03 percent. But I think it will fall to 5 percent. The situation is unlikely to change much next year,” said the executive director at the Policy Research Institute.

“I think the government should focus on stabilising the economy.”