An
interesting trend can be observed when one takes a look at the Gross
Domestic Product (GDP) growth rates of the country during the past few
years. If GDP growth rates are plotted according to year, it has a
resemblance to a wave, containing a peak and a trough. The dips in the
economic growth rates can be seen during election years where rates
start to decline in the years preceding the election years.
We
have seen that every election brought along with it an element of
political violence. This violence in turn disrupts normal economic and
social activities. So when the economy got a respite from the political
violence of 2013, many of us may have breathed a wary sigh of relief.
This, however, was very short-lived as the economy faced another gust of
political violence since the beginning of this year.
One
of the key drivers of economic growth is investment in Bangladesh.
Total investment as a proportion of GDP has been hovering around 26% -
28% for the last five years. One reason for lower public investment is
inadequate tax resources; for private investment, the main binding
constraints are energy, land and transport. In the face of these
existing constraints, political violence certainly makes the investment
environment even more stagnant.
So why can't the country afford
to compromise with investment at this stage? One reason is that the
country is currently experiencing a 'demographic dividend' (a rise in
the proportion of people in the working age population accompanied by a
decline in dependent age population), and 1.8 million people are
entering the job market every year. Without adequate expansion, the
economy will not be able to absorb all the people entering the
workforce.
If we look at the information available for private
sector credit growth, we will see that between June 2014 and November
2014, growth rates on average were 12%. This was lower than the
projected rates and was done for a period when political instability was
not as intense as it is currently.
Another problem of low
investment and GDP growth rates is that a decline in GDP growth rates
also implies that many people are deprived of a chance to move up the
poverty line. One group that bears the biggest brunt of political
instability is that of the daily-wage earners. On one hand their daily
incomes fall and, on the other, disruption in the transport system leads
to a rise in food prices, causing their real income to decline further.
Wholesale
shops and shopping malls experience a fall in sales during periods of
political instability. Although businesses have different coping
strategies to make up for some of the loss due to instability, however,
what the industry most certainly cannot make up for is the clear signal
of an unreliable market. Skepticism regarding the economic health of the
country may discourage foreign investors from investing as there are
other countries offering competitive factors and better political
environment.
According
to Dhaka Chamber of Commerce & Industry's (DCCI) calculations,
losses stand at around Tk. 22.77 billion ($285 million) a day. In
addition to economic costs, there are social and human costs associated
with political instability. Students are faced with missed classes and
postponed exams, which adversely affects their performance and hampers
future prospects. Human costs exist in the form of lives lost and
injuries; however, social and human costs are harder to quantify.
As
far as GDP growth rates are concerned, growth rates climbed up steadily
after election years. What lies for future growth rates of the country
at this point is uncertain and will be revealed with time
