The never-ending debate over GDP growth
Image: Collected
The debate over Bangladesh's GDP growth forecasts is back again. There is wide variation in the projections made by the multilateral development agencies for the current fiscal year amid deep uncertainties about the near-term trajectory of the global economy as the pandemic is still raging.
Last week, the International Monetary Fund (IMF) lowered its economic growth forecast for Bangladesh to 4.4 percent for FY21 from 5.7 percent earlier.
The World Bank said the economy would grow by 1.6 percent. The Asian Development Bank (ADB) painted a more optimistic scenario among the three as it predicted 6.8 percent GDP growth.
The government is, however, bullish about pulling off 8.2 percent GDP growth and has said the WB forecast is not reflective of the ongoing economic recovery.
The modeling exercises to reach the GDP figures are carried out based on a number of assumptions.
This would include the performance of the global economy and whether there would be a second wave of the coronavirus, the service sector would make a comeback, and how long it would take for the transport system to return to its pre-pandemic level, said Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue.
"It appears that the World Bank's assumptions in these areas are more conservative, the IMF's forecast is modest and the ADB is more optimistic."
Zahid Hussain, a former lead economist of the WB's Dhaka office, said the pandemic struck the economy on both demand and supply sides by reducing mobility and assembly.
The consequent decline in income and employment combined with the persisting spread of the virus reduced confidence in goods, labor, and financial markets, thus deepening the economic contraction. All agencies have, therefore, backcasted significantly lower growth in FY20 relative to FY19, he said.
"We can live with differences in the magnitude of the estimated growth contraction between different agencies in times of deep uncertainties brought on by the pandemic."
Monzur Hossain, research director of the Bangladesh Institute of Development Studies, said two factors are important when it comes to carrying out modeling.
Source: https://www.thedailystar.net
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