GDP growth rate now a political number: CPD

The Centre for Policy Dialogue (CPD) Sunday said the gross domestic product (GDP) growth rate has become just a number mismatched with the reality.

The think-tank said there is no scope for using the number except for political purposes as the figures are being generated through old, inconsistent and incomplete data.

In a virtual media briefing, the CPD claimed that the provisional data used by the Bangladesh Bureau of Statistics (BBS) to estimate a 5.24 percent GDP growth in the 2019-20 fiscal year does not reflect the latest economic reality amid the Covid-19 pandemic. 

The civil society organisation said the economy had been experiencing a slump even before the outbreak of Covid-19, while it registered a negative growth in the last three months of the FY2019-20 due to the pandemic.

Against this backdrop, it seems impossible that the overall growth rate would cross 2.5 percent in the last year, according to the CPD.

CPD Senior Research Fellow Dr Towfiqul Islam Khan presented the keynote paper at the programme elaborating on how BBS data differ widely from the economic reality.

Quantum index of industrial production (QIIP) for large and medium manufacturing industries dropped 24.5 percent until last April, while exports dipped 51.2 percent in the April-June period. Only 76.8 percent implementation of Annual Development Programme (ADP) also dragged down the year-on-year spending, the CPD economist explained.

"Therefore, the provisional GDP growth estimate of the BBS is not realistic," he said.

How can growth in pandemic time be same?

He further said the data of private sector credit growth, import of capital machinery, revenue collection and operating expenditure of the government also do not support the estimated growth. 

"For many countries, GDP has shrunk substantially. Pakistan in FY20 is likely to register (-) 0.4% GDP growth. The economy of Vietnam in the January-June period of this year was able to grow by only 1.81 percent," he added.

"In view of the above, even if the Bangladesh economy could grow by 2.5 percent in FY2020, it is likely to be one of the fastest growing economies in the world," said Tawfiq.

Professor Mustafizur Rahman, distinguished fellow of the CPD, said a 5 percent growth requires the economy to grow over 11 percent in previous nine months if it is assumed that 90 percent economic activities continued in the fourth quarter, which is not realistic.

"What changes the economy underwent suddenly that investment rose even during the pandemic? And why the growth slowed then even with the heightened investments?" he said.       

He added that the government would not require to announce the virus stimulus if investment in industrial sectors and production did not dropped.

He did not subscribe to the explanation that the BBS estimate was based on data for nine months till March before the pandemic struck with full force.

"The BBS compared the growth figures with those of the previous years. They did not say that they calculated the July-March figures. If they did they could have an exit route," Prof Mustafizur Rahman said, hoping that the BBS might review its estimate in October calculation when the final figures will be available.  

CPD Executive Director Dr Fahmida Khatun said the BBS report prepared on provisional and inconsistent data does not reflect the coronavirus crisis. Formulating policies for poverty alleviation, minimising inequality and generating employment are not possible if an accurate GDP growth rate remains unavailable. 

"Such estimates can send a wrong signal and hinder foreign assistance," she commented.   

She said the foreign development partners would reduce their assistance for the country if the government presents manipulated growth rates and gives an impression that the economy is doing well defying the pandemic.

Bangladesh deserves more support from the IMF, but the agency has provided less as the government has anticipated a lower impact of Covid-19 on the economy, she pointed out.

Dr Fahmida said growth rate has become merely a number which is used for political purposes.

She said the growth rate seems to have just turned into some numbers with political sensitivity to be used as yardsticks for success.

"The growth numbers have become a fascination for policymakers, which are being used with political motives. These have become political numbers now," Dr Fahmida said.

But GDP growth is not just a number, she noted, adding the figure will not deliver anything if the poverty and inequality rates do not fall and jobs are not created.  

CPD Research Director Dr Khondaker Golam Moazzem said poverty rate would not have gone up, as evident in many surveys on Covid-19 impacts on livelihood, if per capita income actually rose as claimed by the BBS.

The government would not require to come up with cash incentives, relief and extra allocation in social safeties either, he pointed out.     

"And if the investment remained intact defying the virus fallout the government would not have to declare employment and investment-friendly stimulus packages," he added.

Is the BBS figure based on nine months' data?

The BBS disclosed provisional GDP growth numbers for the last fiscal through its website without mentioning the period of data used to formulate the report, but the officials said the report was prepared with data for the first nine months.

Dr Mustafizur Rahman said at the press briefing the BBS would prepare the growth report with the data for nine months if they did it in May, as it usually does. "Since they disclosed the figures in August, we assume they calculated 12 months' data," he added.

As the report has no reflection of the Covid period, it would not be sufficient to prepare any programme, project or policy to recover the economy from the Covi-19 shocks.

BBS report is based on old data

More than half of the provisional GDP estimate is not based on credible real time data, said Towfiqul in his presentation.

He said other than industrial, construction and crop sectors, GDP estimates for majority of sectors do not consider real time credible data as there are areas where no surveys took place in a decade or so.

The provisional GDP growth estimate, which did not capture the impacts of Covid-19 and provide a reliable assessment about the actual health of the economy, would not help to formulate any effective policy to tackle the detrimental impacts of the pandemic, Dr Towfiqul observed in his presentation.

 Why the stimulus and cash support?

Dr Mustafizur Rahman raised a question about the rationality of announcing stimulus packages worth Tk1,03,000 crore to create an investment-friendly environment if the investment truly increased.

The BBS report has claimed that investments from both the public and private sectors increased in FY2020 compared to the previous fiscal.

Dr Khondaker Golam Moazzem said the BBS claimed the per capita income has increased but the government is providing cash and food support for the people considering a sharp increase in the number of poor people.

"Income of the people increased but the number of poor people also increased. How?" asked Moazzem, referring to the BBS data.

Is Bangladesh outlier?

The CPD referred to shrinking growth forecasts in most of countries due to adverse impact of Covid-19.

Towfiqul Islam Khan said, almost all countries, including the UK, USA and Singapore, have experienced deceleration, in varying degrees, in terms of growth performance.

He also said the GDP of Pakistan is likely register a negative growth of 0.4 percent in FY2020.

GDP growth for the economy of Vietnam during Jan-Jun of 2020 was able to grow by only 1.81 percent, he said, adding the GDP of India for the April-June quarter is anticipated to register a significant contraction.

Then what would be actual growth rate?

The CPD earlier projected a 2.5 percent growth for the last fiscal year and the think-tank still sticks to its previous projection.

Towfiqul Islam Khan said even if the Bangladesh economy could grow by 2.5 percent in FY20, it is likely to be one of the fastest growing economies in the world.

Dr Mustafizur Rahman said the health of all indicators but remittance was weak before the start of the Covid-19 pandemic.

The Covid-19 has destroyed all of the indicators, the growth figure of 5.24 percent estimated by the BBS is, therefore, unrealistic, he said.

It would be very difficult to achieve even 2.5 percent of growth, he added.