Bangladesh ends 2016 with a recordbreaking economic growth, thanks to political stability throughout the year.

Only a year ago, one could hardly think that 7.11 percent economic growth would be possible in fiscal 2015-16 after political unrest between 2013 and mid-2015.

But political stability in 2016 has not only yielded high economic growth but has also given entrepreneurs confidence to do better in the davs to come.

Now a $220 billion economy is moving forward with mega development projects, including Tk 30,000 crore Padma Bridge, Tk 22,000 crore metro rail, elevated expressway, flyovers, dozens of economic zones and Payra seaport.

Falling interest rates, increasing access to finance and improvement in working conditions at garment factories have made businesses confident of taking new challenges and boosting export earnings.

Stock markets, which were bearish since its collapse in December 2010, have begun to make a turnaround, helping nearly 30 lakh investors get their confidence back.

Policy reforms, investment in research, mechanisation and use of high-yielding crop varieties have driven growth in the agriculture sector.

The outlook for 2017 has become brighter as the number of consumers and businesses as well as government expenditure are set to rise.

Still, there are a number of challenges, not only in achieving higher growth but also in sustaining the current growth rate.

Static private sector investment, weak institutional capacity, poor governance, deteriorating banking sector and lack of skilled workforce remain big challenges this year.

Economists and businesses say that 2016 has been a successful year in terms of macroeconomic stability - be it gross domestic product (GDP) growth, per capita income, inflation, export, import or poverty reduction.

The apparel industry, which accounted for 80 percent of the total exports worth $34.24 billion in fiscal 2015-16, hopes to earn more this year, riding on its investments in renovating factories and improving working conditions.

"We were busy investing and correcting our factories in 2015 and 2016. Now we are on a strong footing to take the challenge," said David Hasanat, chairman of leading garment exporter Viyellatex Group.

According to him, the sky would be the limit if political stability lasts and labour issues are handled properly.

David is not at all concerned about

the energy crisis, especially shortage of gas, as there are alternatives that have to be explored by the entrepreneurs.

Meghna Group of Industries, a leading manufacturer of consumer goods, also had good business growth last year despite shortage of gas supply.

"We are doing well keeping pace with the rise in purchasing power of consumers. Changing lifestyle and food habits have also contributed to our business growth," said Mostafa Kamal, chairman and managing director of Meghna Group of Industries.

The group is setting up three economic zones to back up its expansion, he said.

Anis A Khan, managing director of Mutual Trust Bank, said the overall economy would be better this year than that in 2016, and is expected to be stable with little possibility of price inflation.

Referring to the banking sector, he said most of the financial institutions are likely to be profitable this year. However, rising nonperforming loans still remain a threat.

"Cyber security will be a high priority area for banks in 2017 following the cyber attacks last year,” said Anis, also chairman of the Association of Bankers Bangladesh.

But despite all these good signs, Bangladesh faces formidable challenges in moving to a higher growth path of 8 percent plus GDP and earn the status of a middle income country.

The foremost challenge lies with the stagnant private investment followed by weak institutional capacity to implement development projects. Though the size of the budget has been increasing steadily, the quality of spending remains a big question to

analysts.

Though public investment has increased to nearly 7 percent of GDP from 5 percent several years ago, private investment remains static at 22-23 percent for over five years.

“Macroeconomic stability was there in 2016, but we didn't see any significant effort to boost private investment," said Prof Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD).

According to him, a key challenge would be to get out of this static state of private investment trend, which can be addressed by strengthening institutional capacity and ensuring good governance.

The issues of implementation capacity and good governance came to the fore after multilateral donors such as the World Bank and countries including China have shown interests to invest billions of dollars in Bangladesh, he said.

The manufacturing sector, which accounts for 30 percent of the country's GDP, badly needs skilled workforce to go for value-added and diversified products.

Also, the Bangladesh economy embraces 2017 with some other challenges that include declining remittance and rising nonperforming loans from the domestic side. Volatile global and gulf region politics, and troubled European economy pose threats as external sources.

Bangladesh Bank statistics show remittance inflow was $12.65 billion from January to November last year, down by 9.31 percent from $13.95 billion in the same period in 2015.

Following the European Debt Crisis and depreciation of different currencies against the US dollar, the pace of

recovery of the European Union economies - the primary destination of Bangladeshi exports - will be critical in 2017, according to analysts.

Three major incidents in 2016

BB CYBER HEIST

In one of the biggest ever bank frauds, cyber criminals stole $101 million from Bangladesh Bank's account with NY Federal Reserve Bank in February last year. The incident came to light several days later.

Of the stolen money, $20 million was recovered from Sri Lanka that acted promptly. Later, about $15 million was recovered in the Philippines and returned to Bangladesh.

TERROR ATTACK

On July 1, a group of Islamist terrorists stormed the Holey Artisan Bakery in the capital's Gulshan, and killed 20 hostages, including 17 foreigners. Two policemen were also killed.

The militant attack suddenly made Bangladesh a scary place to do business. However, the government’s quick and stern response to the attack helped foreigners and local businesses regain their confidence.

MEGA DEALS WITH CHINA

More than two dozen deals involving $25 billion were signed between Bangladesh and China during the landmark visit of Chinese President Xi Jinping in October last year.

The agreements and the MoUs provide for enhanced cooperation in infrastructure development, energy sector and counter-terrorism. The two countries also intend to partner in the development and promotion of economic zones.

China also plans to shift its excess manufacturing capacity and capital to Bangladesh.