Rejaul Karim Byron and Dwaipayan Barua

....................................................

Private investment in Bangladesh fell to its lowest level in 14 years in the last fiscal year owing to the lingering uncertainty caused by the coronavirus pandemic and continuing structural weaknesses.

The descent may slow down the progress made in the areas of employment and poverty alleviation over the last few years.

In 2020-21, the private investment-to-gross domestic product (GDP) ratio declined to 21.25 per cent, provisional data from the Bangladesh Bureau of Statistics (BBS) showed. This is the lowest ratio since 2007-08.

The proportion was also lower than the 24.41 per cent private investment predicted for the last fiscal year in the Eighth Five-Year Plan.

The ratio had risen to 23.5 per cent in 2018-19. It declined to 22.06 per cent in 2019-20 amidst the onset of Covid-19 in March last year.

Selim Raihan, executive director of the South Asian Network on Economic Modelling (Sanem), said the decline in private investment was definitely due to the impacts of the unprecedented shock from Covid-19.

“Private investment might have declined more compared to the provisional data of the BBS since the imposition of fresh lockdowns is hurting the economy.”

Prof Raihan stressed the need for proper reassessment of the plan, especially over the investment situation in the context of the pandemic.

Shamsul Alam, state minister for planning, said, “The plan is not a static document; it is a dynamic document. If the situation requires, we will revisit it.”

He said the plan was formulated, taking into account the impacts of the crisis.

“If any reassessment is needed with the new information and new situation, we will revisit growth rates and investment.”

The overall investment-to-GDP ratio was 29.92 per cent in FY21, the lowest in five years.

In 2016-17, the ratio was 30.5 per cent, and it rose to 31.6 per cent in 2018-19 before coming down to 30.47 in 2019-20 as the pandemic struck Bangladesh.

However, the public investment-to-GDP ratio increased amid the pandemic as the government accelerated spending to safeguard the economy and the people from the crisis.

The public investment-to-GDP ratio was 8.67 per cent in FY21, up from 8.41 per cent FY20 and 8.03 per cent in FY19.

Industrial loan disbursement, a key indicator to assess the investment situation, declined by 8.15 per cent in FY20. In the first half of FY21, the lending fell by 30.8 per cent compared to the same period a year ago, according to data from the central bank.

SME loan disbursement declined by 8.62 per cent in the calendar year of 2020 compared to 2019. It, however, rose 17 per cent year-on-year in the first three months of 2021.

A central banker said the SME loan disbursement increased as many small and medium enterprises started taking loans as the economy was recovering. The disbursement under the stimulus packages also picked up.

However, the private sector credit growth slipped to 8.40 per cent in FY21 against the central bank target of 14.80 per cent due to the depressed appetite for loans among investors.