Bangladesh is unlikely to meet the investment targets set in the sixth five-year plan (SFYP) that ends next fiscal as private sector investment is on the decline.
Leading economists of the country said if the slowdown continues to persist it will pose a serious threat to the country’s macro-economic stability.
General Economic Division (GED) of Planning Ministry in its report on “Bangladesh State of the Economy” released this week said the contribution of the private investment to the GDP was 19 percent in 2013, against the SFYP target of 22.7 percent. Last year, it was 20 percent, the Daily Independent.
Private investment as a share to GDP was increasing in FY11 and FY12 but fell sharply in FY13. Over the last four years owing to the increase in public sector contribution, the total portion of investment in GDP has increased, the GED report added.
Commenting on the fallout of the slowdown in the private investment, former finance adviser to the caretaker government Dr AB Mirza Azizul Islam said, “It will impact the economy very badly through jacking up liquidity in the banking sector.”
The GED report also noted that the savings-investment gap has been gradually declining over the last four years.
“Actual investment figures fell behind the projected figures as expected in SFYP. Since FY11, the investment GDP ratio has been increasing marginally, but it could not catch up the available savings level,” the report added.
Former central bank governor Dr Salehuddin Ahmed also expressed concern over the investment slowdown, saying that the surge in the idle money proved that the private sector is shying away from investment, which according to him would hit the economy very hardly.
Talking to The Independent, World Bank lead economist Dr Zahid Hossain apprehended that it would not be possible to achieve the target, as the prevailing situation is not favourable for investment.
The GED report suggested that the political parties must ensure a business friendly environment to face the challenges of high and sustainable growth in the economy of Bangladesh.
About the country’s employment scenario, the GED said the average growth of 6.3 percent per annum in output for the last four financial years has generated domestic employment for more than 6 million people. In the meantime, around 2 million people went abroad for work.
According to GED, a total of 8.26 million people brought under employment during the last four years. The rate of employment creation in this period has been higher than any time before.
According to the GED– during the first half of the current fiscal year 0.20 percent of the total population went abroad for jobs.
The unemployment rate is increasing due to the rise in the population, it said.
However, for the female workforce, the scenario has been different.
While the Labour Force Survey 2005-06 showed an unemployment rate of 7.0 percent for the female, it was 5.8 percent in LFS 2010 – a decrease of 1.2 percent.
The total unemployment rate slightly increased in 2010 as against in 2006.
The unemployment scenario almost perfectly reflects in the Labor Force Participation Rate.
A 6.80 per cent increase in female participation and a 4.30 per cent decline in male participation have made the total participation rate increasing a bit (0.8 per cent).