Eighth five-year plan unfazed by pandemic

The government is aiming to clock more than 8 per cent economic growth on average during the Eight Five-Year Plan period as it hopes that the impacts of the devastating coronavirus pandemic would fade in the second half of the current fiscal year.

Gross domestic product (GDP) is expected to recover in the second half of the FY21 driven by external demand recovery, the rebounding in domestic demand and the impact of the fiscal stimulus, according to the plan document.

“All sectors of the economy except education are already open. The private sector has opened up. Exports are picking up. Remittance flow is robust. So, we are hopeful,” M Shamsul Alam, a member of the General Economics Division and the main author of the plan, told The Daily Star yesterday.

The GED has started a series of consultation meetings on the draft plan with stakeholders. As part of the consultation, Prof Alam made a presentation on the draft at a virtual meeting on Wednesday.

AHM Mustafa Kamal, finance minister, MA Mannan, planning minister, and Prof Wahiduddin Mahmud, chair of the panel of economists, attended the meeting, among others.

According to the document, with the advent of the Covid-19, the projected growth path has been disrupted. Most of the damage will happen in the FY20.

The pandemic prompted the government to trim down the GDP growth projection by three basis points to 8.2 per cent for the current fiscal year, the first year of the five-year plan, from 8.23 per cent estimated before the pandemic hit the country in March this year.

Bangladesh would post 8.51 per cent in the final year of the plan period, which is FY25. Per capita gross national income would hit $3,106 in FY25 from $2,064 in the last fiscal year.

The poverty rate would decline to 15.6 per cent in FY25, which is expected to stand at 23 per cent in the FY21. The incidence of extreme poverty would fall to 7.4 per cent from 12 per cent now.

It targets to bring down inflation to 4.8 per cent by FY25. At the end of the plan period, private investment to GDP would stand at 28.2 per cent and public investment 9.2 per cent.

The share of agriculture in terms of GDP would fall to 10.6 per cent from 13.4 per cent in the last fiscal year. The share of the industrial sector will climb to 42 per cent from 35.4 per cent in the FY20.

However, the share of the service sector would decline to 47.4 per cent from 51.3 per cent in the last fiscal year.

The government would target to raise spending on education to 3 per cent in FY25 from 2.2 per cent in FY19, health spending to 2 per cent from 0.7 per cent and social protection expenditure (excluding civil service pension) to 2 per cent from 1.2 per cent in FY19.

Total investment and financing during the plan period would be Tk 6,415,520 crore. Of the sum, 19.3 per cent would come from the public sector and the rest from the private sector.

Domestic resources would account for 87.4 per cent of the investment and financing and the rest would be mobilised from external sources.

The investment and financing in the current plan period are more than double from Tk 3,190,200 crore in the Seventh Five-Year plan period.

Bank borrowing would fall to 0.63 per cent of the GDP in FY25 from 3.32 per cent in the last fiscal year.

The government plans to raise tax revenue to GDP growth of 12.26 per cent in FY25, which was 8.89 per cent in FY19, which was one of the lowest in the world.

According to the document, there are three major challenges on the employment front: First, employment growth has been much slower than GDP growth implying that the employment elasticity of GDP is falling.

Second, employment in manufacturing and construction contracted between 2013 and 2016-17 even as value-added growth in these activities accelerated.

Third, the concentration of jobs in the informal sector further increased raising concerns about the shortage of decent jobs.

“A major policy challenge facing the 8FYP is how to ensure that GDP growth acceleration creates more good jobs in the economy,” said Prof Alam in the presentation.

The plan’s strategy to addressing the poverty problems for the lagging regions would be to refocus ADP spending to improve the health, education, and infrastructure needs, give higher priority and greater beneficiary coverage of social protection programmes, focus agriculture research and extension services to help farm productivity and incomes and support the growth of non-farm rural enterprises.

The plan includes seven pivotal themes: promoting labour-intensive, export-oriented manufacturing-led growth; promoting agricultural diversification; infusing dynamism in the micro and small enterprises; strengthening modern services sector; pushing exports of non-factor services; and strengthening overseas employment.