World Bank country director Johannes Zutt speaks at a briefing at the WB office in Dhaka on Wednesday. — New Age photo
The World Bank on Wednesday projected that Bangladesh’s economic growth would slow down to 5.7 per cent in the current fiscal year, much lower than the government’s projection of 7.2 per cent, mainly due to political unrest ahead of next general elections and lower investment.
The international lender disclosed their projection at a press briefing on Bangladesh Development Update-2013 at its office in Dhaka.
The WB also said that rebuilding the image of readymade garment industry is the most pressing challenge for the country in coming days along with improving investment situation, removing supply bottlenecks and maintaining economic and financial reforms.
Earlier in the month, the International Monetary Fund and Asian Development Bank also forecast lower GDP growth for fiscal year 2013-14 at 5.5 per cent and 5.8 per cent respectively.
‘Economic Growth targeted for the current fiscal year cannot be achieved. The GDP growth may be even lower than the forecast if the ongoing political disturbance along with other internal strife continues,’ WB lead economist, Zahid Hussain, said.
Low growth in industry and service sectors will play a role in reduction of the overall economic growth, he said.
He said that the projected growth would depend on internal stability and structural reforms.
‘Bangladesh’s overall economy is moving into a more volatile phase,’ Zahid said.
The risks stemming from the impending political transition have grown significantly while new risks and challenges have gained prominence, including notably the risks associated with the damaged image of the RMG industry, he added.
He said that inflation might go up because of internal reasons. The election may hamper the implementation of tax policy, good governance and manpower export. These will have an impact on national economic growth.
World Bank country director Johannes Zutt said that the RMG sector has been a key contributor to Bangladesh’s strong economic performance.
But the industry is now at a critical crossroads, as recent factory fires and building collapse have exposed the hazards the workers face and also severely tarnished the industry’s image, he said.
‘Bangladesh must act now to articulate and enforce improved standards for building safety and worker health and security, so that the garments industry can continue to grow and other industries can follow its example,’ he said.
In its update, the WB said that industrial accidents have revived concerns over compliance in labour standards and worker safety, putting Bangladesh’s competitiveness in RMG at risk.
‘The time to act is now. The most immediate priority for the government is to ensure enforcement of the steps suggested by foreign buyers, international agencies and domestic regulatory bodies,’ it stated.
It warned that the cost of inaction could be high.
‘Removing GSP facility by the USA may not hurt the RMGsector unduly, as the benefits to the industry were non-existent, but if the EU truncate or suspend the GSP facility, Bangladesh could see its total exports fall by as much as 4.1 to 8 per cent,’ it said.