Extreme poverty in Bangladesh declined further to 12.9 per cent in the financial year (FY) 2015-16, according to the latest Bangladesh Development Update, released by the World Bank (WB) in Dhaka Monday.
The Update has projected 6.8 per cent economic growth for the country in the current financial year (FY 2016-17) — 0.4 per cent less than the government’s target.
The government has set a target of 7.2 per cent growth in the country’s Gross Domestic Product (GDP) for the FY2017.
“Without boosting Total Factor Productivity growth and private investment relative to GDP, Bangladesh is unlikely to sustain 7.0 per cent growth going forward,” the WB Update said.
Based on its updated global extreme poverty measurement methodology, the global lender in its report titled “Poverty and Shared Prosperity 2016: Taking on Inequality” said the rate of alleviation of poverty in Bangladesh is impressive.
Under the 2011 Purchasing Power Parity (PPP), the Bank has changed its extreme poverty measurement method where it has said a person who will have an income below US$1.90 per day will be considered as an extreme poor.
Earlier, the WB used to measure extreme poverty on the basis of $1.25 income per day.
Meanwhile, the government’s estimate shows that Bangladesh’s extreme poverty declined to 12.1 per cent while the absolute poverty to 23.6 per cent in FY2016.
Lead Economist of the WB Dhaka office Zahid Hussain in a presentation said the extreme poverty has gone down as the PPP exchange rate for Bangladesh appreciated from Tk 52.4 per US$ in 2005 to Tk 24.8 per US$ in 2011 due to methodological upgradation.
“This means the purchasing power of taka relative to US$ was stronger than previously estimated,” he added.
Explaining, he said, the poverty estimate done by the Bangladesh Bureau of Statistics (BBS) is based on its own methodology from the national perspective while the WB counts on its unique global methodology.
Mr Hussain termed Bangladesh’s economic growth as a “shared prosperity” one, saying that the country’s bottom 40 per cent people’s income growth or consumption per capita is 0.43 percentage point higher than that of the total population.
“Bangladesh has outperformed India, Pakistan and Bhutan, but fell behind the neighbours in East Asia including China, Vietnam and Cambodia on this indicator in sharing prosperity.”
Bangladesh’s per capita consumption of the bottom 40 per cent grew by 1.77 per cent per annum during 2005-2010 while that of total population expanded by 1.34 per cent per annum.
The WB lead economist, however, projected a poor prospect in achieving the SDG-1 (Sustainable Development Goal-1) with the current poverty reduction and economic growth trends in the country.
He said: “If the country wants to achieve the goal, the GDP growth needs to pick up to 8.8 per cent annually or it has to focus on more inclusive growth with the current 6.1 per cent growth average between 2005 and 2010.”
According to the SDG-1, a country will have to cut its poverty to below 3.0 per cent by the year 2030.
On the 7.05 per cent GDP growth in FY2016, Mr Hussain said industrial growth was the main driver with rebounded export earnings.
“Bangladesh’s export is heavily dependent on the readymade garments. Its export diversification policy has not worked. The country should work on the diversification,” he suggested.
The WB economist said the gap between the government’s investment target in the 7th five-year plan and the achievement is widening, which is a bad news for the country.
“Although the country’s savings to GDP is higher than the investment to GDP, the private investment is not occurring, raising question whether capital flight is going on,” he added.
Explaining the reason for lower investment than the target, Mr Hussain said Bangladesh is not improving in WB’s doing business indicators and its policy and structural reforms are not getting pace with the entrepreneurs –especially the foreign investors are not getting faith here.
The WB development update has projected a lower GDP growth to 6.2 per cent in the next FY2018 too as it said the consumption will fall further with a declining remittance inflow.
Mr Hussain said remittance in the last FY2016 fell by 2.5 per cent and in July-August period of this fiscal year fell 15.3 per cent as compared to the corresponding period of last fiscal year.
“Since the global oil price has fallen sharply, the Bangladeshi migrant workers mostly in the gulf countries are getting lower payments than the past years from their employers. It has affected the remittance flow to Bangladesh despite a growth of the number of overseas job holders,” he said.
Hussain cautioned about the increasing urban inflationary trend, saying it would affect the inclusive growth of the country. “The sudden pick of the urban inflation may be an impact of the salary hike of the public servants. But this inflationary pressure needs to be tamed down.”
The WB development outlook has showed the security; and financial and trade shocks as the main downside risks for the economic development of the country.
“The security shocks have the potential to cause damage to the economy, particularly impacting investment and consumer confidence,” said Hussain.
He also said that there are some international shocks like weaker-than-expected global trade, increased trade protections in some countries, weaker than expected remittance and an unexpected tightening of global financing conditions on the Bangladesh’s economy.
Meanwhile, WB Country Director Qimiao Fan said Bangladesh has done an impressive job in reducing poverty over the last decades and has the potential to end extreme poverty by 2030 if it takes firm steps to make growth more inclusive to benefit all citizens.
The economy in Bangladesh is very much resilient despite different challenges in the country, he added.
Mr Fan said World Bank Group President Jim Yong Kim plans to travel to Bangladesh later this month as part of a global End Poverty Day campaign.
“His visit is intended to draw attention to Bangladesh’s impressive record in dramatically reducing extreme poverty.”