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Political unrest ate up $1.4b

WB study finds service sector most affected in six months

Staff Correspondent
Bangladesh has suffered a production loss of $1.4 billion (around Tk 10,857 crore), which is more than 1 percent of its gross domestic product, in the current fiscal year due to political turmoil from July last year to January, according to a World Bank study.
The WB revealed the findings yesterday at the launch of Bangladesh Development Update Report 2014 at its Dhaka office.
In late January, local think-tank Centre for Policy Dialogue also came up with an estimate of the country's economic losses, almost five times that of the WB.
The CPD estimated that nationwide shutdowns and blockades from July to
December last year caused a loss ofTk 49,017 crore to the transport, garment, agriculture and tourism sectors.
The economic loss Bangladesh suffered in the current fiscal year was more than one percent of the country's CDP of around $130 billion, according to the WB.
Of the losses, 86 percent was in the service sector, 11 percent in industry and the remaining 3 percent in agriculture, it said.
"This loss reduces the growth rate |GDP] from the 6.2 percent benchmark to 5.4 percent," said Zahid Hussain, lead economist of WB's Bangladesh chapter.
Zahid said the WB's latest growth projection on Bangladesh was not disastrous compared to the growth in other South Asian countries.
"We have been accustomed to 6 plus growth rate over the last several years. In this context, 5.4 percent may seem disappointing to many but it is not unsatisfactory at all in the present context," he said.
The WB report said the opposition parties (the BNP-led alliance) had enforced 85 days of nationwide hartals and blockades since January last year. Of those, 45 days were between July and January.
All sectors - be it a bank, manufacturer, trader, transport company or a small dairy farm - had to bear the brunt in many ways. Many trucks loaded with goods, and buses were torched. Power stations and schools too were not spared.
Political unrest most affected the service sector, which accounts for more than 54 percent of GDP. Transport, wholesale and retail trade, domestic tourism and entertainment, and hospitality firms were hit hard.
Activities on inter-district or crosscountry road networks remained stopped with huge loss of income for a couple of months.
The financial sector suffered a blow, as many of the affected entrepreneurs couldn't pay back their debts, and are now seeking special financial arrangements for survival.
"The private investments were depressed ... Its impact on aggregate demand was compounded by the political turmoil and decline in remittances as they weakened private consumption expenditures, notwithstanding wage increases in the public and private sectors,” according to the report.
Strong export demand and restoration of political stability since the January 5 elections have revived economic activity, it said.
"However, investments remain weak in general due to continued uncertainty with regard to the stability of the political climate over the medium term and garments exports remain subject to the risk of GSP (Generalised System of Preference] removal in Europe."
Bangladesh faces three sets of formidable challenges in the immediate future. One is maintaining stability and resolving political uncertainties, and boosting investments in power and roads, the report said.
The other two are managing the transition in the readymade garment industry, and stemming the decline in remittances.
Zahid said Bangladesh can achieve 6.5 percent GDP growth in the next fiscal year if the decline in remittance growth stops, cloud over the garment sector disappears and people can keep their shops open.