Bangladesh

BANGLADESH, a market based economy, has successfully sustained a robust GDP growth over the past seven years.

Its per-capita income was estimated at $1,316 in 2015-16 which is expected to increase by 11.39pc to $1,466 in 2016-17, according to the Bangladesh Bureau of Statistics.

Although around 47m population is still living below the poverty-line, Bangladesh is now focusing on establishing itself as a middle-income economy by 2021, after having beaten poverty to phenomenal levels, with reduced population growth, improved health and education, as compared to past years.

The government has implemented a policy reforms to create an open and competitive climate for foreign and local private investment.  The garment industry, other exports, and overseas labour of the country have greatly helped in reducing poverty and sustaining growth.

Foreign investment is a key element of the growth plan, and will need an annual GDP growth of 7.5–8pc which is possible by overcoming significant obstacles and seizing opportunities inevitable by changing global circumstances.

A decrease in economic reliance on low-cost exports, like garments, and focus on higher education and technical and vocational skills training will further help.

In FY15, Bangladesh achieved a handsome 6.6pc growth. GDP growth is expected to be 7.05pc in FY16 before slowing to 6.9pc in FY2017, according to the Asian Development Outlook 2016.

The government is strengthening its efforts to attain high revenue target, keeping the growth target at 7pc for the FY17, the country’s central bank forecasts average growth between 7.1-7.3pc.

For infrastructure projects and achieving growth targets, the country aims to raise revenue to 12.4pc of GDP for financing a larger annual development programme and a major increase in other capital spending in its next budget.

The deficit is targeted at 5pc of GDP with about 60pc to be financed by domestic borrowing.

According to FocusEconomics, FDI in Bangladesh played an important role in expanding growth in the past, but it is likely to suffer due to the increasing security risks this year.

The economy is expected to slow down, expending 6.8pc in FY17, before picking up to 6.9pc in FY18.

Bangladesh economy has braved weak global prospects and Brexit and remained driven by its garment sector. The World Bank projects growth for 2017 at 6.8pc and the IMF at 6.9pc.

Bangladesh’s shipbuilding industry could emerge as a new growth driver. BMI expects the GDP growth to remain steady but domestic security threats could pose

downside risks to its economic growth trajectory over the medium term. Goldman Sachs had termed Bangladesh’s economy as ‘the miracle of East’.

Sri Lanka

SINCE its independence in 1948, Sri Lanka’s economy has been affected by natural disasters and several insurgences. As a result, economic growth has been uneven.

After the civil-war until 2009, the country’s economy has grown at a 6.4pc average in 2010-15. Real GDP growth was 4.8pc in 2015. Currently, the economy is strained owing to a combination of an onerous external environment and policy adjustments.

According to Sri Lanka’s central bank’s governor, economic growth will pick up in the second-half of 2016 to end the year between 5.0-5.3pc. Based on first-half performance, the ADB has revised down economic growth to 5pc for 2016 and 5.5pc for 2017.

The World Bank sees Sri Lanka’s economy among the slowest growing economies in South Asia, and projected it at 5.3pc for 2016-17.

The IMF has revised its projections for the country, forecasting GDP growth for 2016 and 2017 at 5pc each. The country needs to give a high priority to structural reforms to increase competitiveness, improve governance and consolidate its fiscal balance in order to ensure sustained growth and development.

The government has approved a budget deficit of 4.7pc of GDP for 2017, down from a targeted 5.4pc this year. Under an IMF programme, Sri Lanka is expecting to increase revenue and grants to 14pc of GDP in 2017 from 13pc in 2016. Total expenditure is expected to grow to 18.8pc of GDP in 2017 under the IMF programme from 18.4pc in 2016.

The government also plans to increase revenue through improving tax-base and its administration and rationalising expenditure to achieve the targeted budget deficit of 5.4pc in 2016, and further reduce it to 4.7pc in 2017.

In June 2016, Sri Lanka received a 36-month Extended Fund Facility of IMF to support the country’s economic reform agenda, aimed to boost tax ratio, reduce budget deficit, rebuild forex reserves, and improve public financial management.

Another agreement with IMF was made for a $1.5bn bailout as Sri Lanka faced heavy fund outflows and overseas debt payments while declining forex reserves, putting the country on the verge of a balance of payments crisis.

The country, however, still remains under pressure to stay on track of fiscal reforms. Falling oil prices is risking inflows from Sri Lankan workers overseas. Economic headwinds have contributed to a fall in revenue and higher recurrent expenditure, pushing the 2015 fiscal deficit up to an estimated 6.9pc of GDP.

An official estimate of Sri Lanka’s debts to its financiers is $64.9bn, of which $8bn owned by China. Public debt is still high at above70pc of GDP, though decreasing since 2004 when it peaked at 102pc of GDP.

The key reason for this debt-trap are the non-concessional commercial loans taken out between 2009 and 2014 by the previous government. The World Bank sees the overall debt ratio increasing in 2016, as Sri Lanka has had difficulty keeping the deficit within the budget as well as increasing tax revenues as a per cent of its GDP.

Published in Dawn, Business & Finance weekly, October 24th, 2016