GDP size could shrink by $9 billion

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The step to dispel “discrepancy” in the export data of the first 10 months of the last fiscal year is likely to bring an upheaval in the country’s economic data as, according to the corrected data, nearly US $14 billion “export earnings” have vanished into thin air within the time.

The amount soars to $23 billion if the two years is taken into account instead of 10 months. The country is now facing a possibility of seeing a decline in gross domestic product (GDP) size if this "corrected" export income data is considered in relevant calculations.

According to an initial calculation, Bangladesh’s GDP size could shrink by 2 per cent, which amounts to $9 billion or over Tk 1 trillion, with the dollar rate being Tk 115.

If the GDP size shrinks, the per capita income will also come down.

According to a latest calculation, Bangladesh’s GDP size was $459 billion in 2023-24 financial year.

An analysis of recently published data of the Bangladesh Bank and Export Promotion Bureau (EPB) showed these.

The central bank on Wednesday published the “actual data” of exports for the first 10 months (July-April) of the just-concluded financial year. There was a difference of about $14 billion with the data published by EPB, triggering debates over the misrepresentation of export data.

According to EPB, the monetary value of the export of goods and services in that period amounts to $47.47 billion but the BB says the amount is $33.67 billion. The difference between the two calculations is $13.8 billion.

The businesspersons, however, have been complaining for a long time that the EPB is providing inflated data on export earnings.

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Mustafizur Rahman, a distinguished fellow at Centre for Policy Dialogue (CPD), told Prothom Alo, “The size of GDP will decrease slightly if exports decrease. But the contribution of exports to our economy is not much as value addition from exports is comparatively smaller. Take the apparel sector for example - export items are produced by importing a huge amount of raw materials.”

The export income has been shown much higher than the actual account for a long time. There were reflections of this in all relevant sectors and indicators, including GDP and per capita income
Policy Research Institute executive director Ahsan H Mansur

According to Mustafizur Rahman, the change in the calculation of the outgoing fiscal year’s GDP will come as a result of the decline in exports.

Alongside the shrink in size, the contributions of agriculture, industry and service sectors may also change, he remarked.

Contribution to GDP $30 billion, says EPB

Eighty five per cent of the products exported from Bangladesh are ready-made garments while the rest of the earnings come from leather and leather products, tea, jute and jute products, plastics, food products and other products.

According to the EPB data, Bangladesh exported RMG products worth $40.35 billion in the 10 months. Nearly 40 per cent of the total export earning of this sector is spent to import yarn, cloth and other raw materials. That means, raw materials worth $16.14 billion were imported in that time. The remaining $24.21 billion was added to GDP.

EPB said that $7.12 billion was earned through exports of non-apparel products during the July-April period.

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However, the rate of local value addition from these products is much higher than that of RMG products. About 90 to 100 per cent domestic value addition is achieved through these products.

If a low rate of 90 per cent value addition is assumed, then $6.4 billion has been added to the GDP from the export of these products.

If the export earning data provided by EPB is taken into account, then the total value addition to GDP from exports of RMG and other products during the July-April period of last fiscal was $30.61 billion.

Contribution is $21 billion, says Bangladesh Bank

The Bangladesh Bank collects the data of export earnings coming to the country through various banks. The central bank thinks that this data and the actual export earnings “do not differ much”.

But the actual data, the Bangladesh Bank released Wednesday, showed that in the first 10 months (July-April) of the last financial year, goods and services worth $33.67 billion were exported from the country. That is, the difference between EPB and “actual export income” is $13.8 billion.

This ‘actual information’ regarding export of the Bangladesh Bank will have an impact on the size of GDP. Roughly, the RMG sector covers 85 per cent of the export. As such, RMG products worth $28.62 billion have been exported in the last 10 months, according to the BB. Excluding 40 per cent of the money for raw material import, the local value addition stands at $17.17 billion.

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As per the central bank assessment, other products, worth $5.05 billion, have been exported. That means, considering a 90 per cent value addition from the non-apparel products, $4.54 will be added to the GDP. The total value added to the GDP from exporting RMG and other products in between July and April stands at $21.71 billion as per the export data of the Bangladesh Bank.

GDP likely to decline by $9 billion

The export information of the central bank is considered the final account. Therefore, the contribution of the export sector in GDP will decline. It has been calculated that due to the difference in the information provided by the EPB and BB, the contribution of the export sector in GDP is likely to decline by $9 billion.

The Bangladesh Bureau of Statistics (BBS) declares the size of GDP in both dollars and taka. According to the intermediary BBS account, the size of Bangladesh’s GDP is $459 billion. As a result, the size of GDP is likely to decline by 2.13 per cent as per the new information.

However, it won’t have that much impact on economic growth, according to economists. The Bangladesh Bank said the export income declined by around $12 billion in the previous 2022-23 fiscal as well. The size of GDP for the previous fiscal will decline. So there won’t be much impact on the GDP growth for the immediate past fiscal as the GDP base for the 2022-23 fiscal has also declined.

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Wishing not to be named, an official of the Statistics and Informatics Division of the planning ministry said the size of GDP is likely to shrink due to the revised information regarding export. But, the official amount of decline in GDP will depend on the final accounts of every sector for the entire year. However, he feels there won't be any massive fluctuation in the GDP growth.

Speaking regarding this, Policy Research Institute (PRI) executive director Ahsan H Mansur told Prothom Alo, “The export income has been shown much higher than the actual account for a long time. There were reflections of this in all relevant sectors and indicators, including GDP and per capita income. Now the error has been corrected. Though it’s not final and it should be further reviewed.”

According to his estimation, due to the decline in export income, the size of GDP will decline by at least $8-9 billion.

Ahsan H Mansur suggests the balance of payments should be reviewed immediately. The authorities can seek help from the International Monetary Fund (IMF). However, there is no need to hurry. The final account should be based on the actual export-related information, he added.

* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Shameem Reza & Ashish Basu