The country is likely to see its potential growth rate peaking in the mid-2030s when its economy will start getting dividends from infrastructure spending, diversification in economy and higher productivity, Bloomberg Intelligence forecasted recently.
“We expect Bangladesh’s potential growth rate to inch up to 6.5% by the mid-2030s from 6.3% now,” it says in a long-term outlook for Bangladesh released on Wednesday.
Skilled human capital, wider access to the Internet in rural areas, foreign investment, emerging sectors and more women coming into jobs are among the drivers of Bangladesh’s future growth, it said.
A demographic drag, limits to infrastructure spending, job cuts from automation in sectors like garment and climate change remain a risk to the long-term outlook, it warned, adding that climate change vulnerability was the biggest threat for the future growth of the country.
The research arm of the New York-based media and financial company Bloomberg believed several ongoing mega-projects in the transportation and power sectors should raise productivity once completed, while trade and economic cooperation pacts under discussion with countries should facilitate investment flows.
The government’s focus on diversifying the economy through promotion of sectors like food processing, light engineering, and information technology should spur more investment and create jobs, Bloomberg Intelligence hopes.
This will likely help offset the negative impact of increasing automation on the mainstay garments sector, it added, hoping that new training programs will help build human capital, bring more women into the workforce and bridge skill gaps in emerging sectors.
More skilled workers will then bring home more remittances, which, along with other gains in human capital, will help offset the slow growth in Bangladesh’s working-age population through 2053, it foresees.
The government is filling in infrastructure gaps to boost exports and stepping up investments in special economic zones and mega-projects, which should attract more foreign investment, it says, citing an economic partnership agreement under negotiation with India as well as similar initiatives with Japan, Singapore and other countries.
“We expect annual investment growth to pick up slightly to 8.4% through 2040 from 8.3% during the last two decades,” says Ankur Shukla, an economist at Bloomberg Economics who analyzed the research.
Projecting a steady rise in productivity gains, Bloomberg Intelligence in its outlook hopes 100 special economic zones planned by 2030 will attract foreign businesses and rural digital centers and deeper internet penetration will improve government service deliveries and public sector efficiency.
Trade pacts being hashed out with Japan, Singapore and other countries will increase competition and make local firms more efficient, it feels.
Failure to create jobs outside the garment industry is another risk as it fears rapid adoption of automation may lead to mass unemployment in this key sector.