Now BBS shows how uneven growth points to deeper inequality

Covid-19-induced losses in Bangladesh's gross domestic product (GDP) in the last two fiscal years stood at Tk3.07 trillion, which was over 10% of the estimated GDP in FY21.

The pandemic, however, did not hit all the sectors and subsectors of the economy equally, causing divergent impacts on people of various income and social groups as revealed in the last two years' gross domestic growth figures released by the Bangladesh Bureau of Statistics last week.

It says the manufacturing sector, which employs about 1.20 crore people or a fifth of the country's total workforce, posted less growth in FY20 and FY21, marking a sharp fall from their pre-pandemic level.

Some other low-skilled labour-intensive subsectors of services like hotel and restaurant, land and water transport, retail and wholesale trades, and motor repair workshops achieved lower growth. These subsectors create jobs for more than 2 crore people.

According to BBS data, about 3.22 crore low-wage workers engaged in different sub-sectors took the hardest blow from the slump in growth witnessed by various subsectors for the past couple of years. Most of them either lost work or faced wage cuts due to the pandemic.

The assessment comes close to previous estimates of independent think tanks who suggested that the first wave of Covid-19 pushed up the number of new poor people in crores last year – mainly due to loss of livelihoods and incomes. A joint study by the Power and Participation Research Centre (PPRC) and the Brac Institute of Governance and Development (BIGD) estimates the poverty rate had jumped 21% as the first wave forced 3.65 crore people into poverty afresh.

But the government has so far not endorsed these figures of the new poor. Estimates of poverty will be accepted only if those come from the BBS or the BIDS – two official agencies, Finance Minister AHM Mustafa Kamal had said more than once.

Though the BBS has not given any poverty figure, its latest data made it clear how big the impact of the pandemic was on the low-wage jobs, and how some white-collar jobs remained unharmed or even benefited.

In spite of sluggish growth in the service sector, the public administration and defence subsector achieved 5.44% growth in FY2020, slightly below the 6.40% pre-pandemic growth. The subsector was close to full recovery in FY21 with a 6.16% growth.

The health sector achieved the highest 9.97% growth in FY20 and the rate was 9.94$ in the following year.

In spite of the closure of all educational institutions, the education sector achieved a 5.06% growth in FY20 and the growth rate increased further to 5.56% last year.

What slower growth means to them

Economists and analysts have found skewness in the distribution of growth in growth in the economic subsectors in FY20 and recovery in FY21.

They anticipate the uneven sectoral distribution of growth would encourage further inequality and hamper the progress in poverty eradication.

They have urged the government to provide support to the poor who are denied the benefits of economic growth to protect their livelihoods and create demand for goods being produced in small-scale industries.

Manufacturing is the largest subsector of the economy – contributing 23.66% of the GDP – where over 20% of the country's total labour forces are engaged.

The subsector achieved a 1.8% growth in FY20 and recovered slightly in the last fiscal with a 5.77% growth – far behind the 14.20% growth posted pre-pandemic.

Large-scale industries achieved a paltry 1.39% growth in FY20, down from 14.84% in the previous year. Small-scale industries achieved 3.96% growth in FY20 and the sector degraded further in the following year to witness a mere 1.73% growth.

The service sector achieved 4.16% growth in the 2019-2020 fiscal year – 2.62 percentage points lower than fiscal 2019, including regular growth in the sub-sectors like public administration, education and health where government officials and high-skilled workers are engaged.

The land transport sector that employs 31.38 lakh people grew by 2.47% in the FY20, which was significantly lower compared to a 7% regular growth.

The water transport sector engaging about 7 lakh people achieved only 1.47% growth in FY20.

Growth in wholesale and retail trade dropped to 4.03% in FY20 – less than half of the FY19 growth. The sector is accommodating more than 1.41 crore of people.

A report published recently by the Bangladesh Bureau of Statistics revealed that more than 22.83 lakh people are engaged in the hotel and restaurant sector. The sector achieved a 1.75% growth amid the pandemic in FY20 – far below the 7.57% growth registered a year ago.

Professor Dr Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD) told The Business Standard, industrial productions were lower than the expected levels in the past two years as a large part of economic activities was closed due to the coronavirus, the impact of which is evident in the growth report. However, the issue that is not being discussed is that the effect of the pandemic has not been equally felt in all sectors of the economy.

He said the benefits of economic growth over the past two years have been unequally divided between sectors. "Growth has not benefited sectors that employ more workers and poorer people.

"From an economic point of view, this distribution of growth is an injustice. Such growth will increase inequality in society. This type of growth will also hamper poverty alleviation activities in the future as poverty among the working class is increasing."

He further said chiefly government employees work in the public administration, health and education sectors and, even amid the pandemic, their salaries have increased more than that in the normal time. Growth in these sectors means the out-of-pocket expenditure of public money has increased even if the scope of services remains the same.

Dr Sayema Haque Bidisha, professor of economics at Dhaka University, said the pandemic has taken a toll on the production in almost all the countries of the world. Bangladesh has posted a positive GDP growth even amid these hard times, which is encouraging, she observed.

But it remains to be seen how much the poor have benefited from this growth, she said, adding, "When the growth of labour-intensive industries is hampered, the income of the people engaged in these sectors decreases. Poverty rates also rise."

Both economists have suggested increasing cash assistance to protect the poor and low-income people.

They said after the release of the final growth report, it has become very clear what kind of damage has been done in which sector. The government also has a list of the number of manpower employed in various sectors.

They said if the affected low-income people are provided with some money, they would be able to survive. Again, if they do some shopping, the demand for products produced in small-scale industries will also increase a bit.

Tk3.07 trillion lost in 2 years

The government, in the national budget for the 2019-20 fiscal year, had set a target to increase the size of the GDP to Tk28.89 trillion. Due to the coronavirus, all kinds of economic activities came to a standstill for more than three months towards the end of the year, and, at the end of the year, the GDP stood at Tk27.39 trillion. From this count, the pandemic induced a Tk1.47 trillion loss to the GDP in one year.

In the budget for FY21, the size of GDP was set at Tk31.72 trillion. But, as per the preliminary BBS data, the GDP stood at Tk30.11 trillion – meaning the coronavirus caused a GDP loss of Tk1.61 trillion in the last financial year.

As a result, the total loss in the last two financial years was over Tk3 trillion, which is more than 10% of the latest GDP.

The government had set a growth target of 8.2% in the 2019-2020 fiscal year. Towards the end of the financial year, the preliminary assessment of the BBS found the growth rate to stand at 5.24%. However, after about one and half years, the BBS in its final calculation showed that the growth rate was 3.51% in FY20.

The government again set the GDP growth target at 8.2% for FY21 but later brought it down to 6.1% in the revised budget for the fiscal. The BBS has projected 5.47% growth in FY21 in its preliminary calculation. Economists, however, fear that the real growth will be lower again considering the impact of the Delta variant of Covid-19 in the last three months.