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Political Unrest to Undermine Economic Advances

Looming political uncertainty over the upcoming general election in Bangladesh gives leading economists to believe the country’s economy, already reeling from shock of the Ukraine war, may face further setbacks.

Suggesting all the stakeholders to act “responsibly”-to leapfrog any such eventuality–they forewarn that the political unrest will result in contraction of the economic activities and thereby ultimately would hinder the GDP growth.

In recent weeks, there have been massive showdowns by both the major political parties–the ruling Awami League and its archrival BNP-in the streets, triggering a sense of unease on the economic front.

If the political situation gets confrontational, it will definitely undermine the economic growth potential due to multidimensional adverse impacts, Prof Mostafizur Rahaman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), told The Financial Express.

In the event of such circumstances, investment, both foreign and domestic, will be affected, he predicts, reminding that uncertainty always impacted economy negatively.

“Already we have seen that the country is lagging behind in different economic ratings and indices,” says Prof Mostafiz, expecting a “responsible and restrained behavior” from the political players.

All parties and stakeholders should ensure that their activities would not affect the economy.

“Definitely the politicians do politics for the good of the country so they should refrain from doing anything which could harm the economy of the country,” he observed.

Every sector of the economy – investment, production, employment generation and domestic and external trade – will be affected if political situation would become unstable, he said.

The policy researcher makes a call of conscience as such for both the ruling and opposition sides of the political divide to avoid measures that might cost the economy dear.

He points out that in a democratic society political movement is a natural phenomenon, but that should not be at the cost of the economy.

Talking to the FE, Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said confrontational politics would definitely affect the economic activities, destabilizing the balance-of-payments situation.

“Movement of people and goods will be hampered, economic activities will be slowed down, so there will be a big impact which we should avoid,” says Dr Mansur, who had once served the IMF.

“Political instability is always a threat to economy. It is a manmade disaster. It will affect the FDI, and I feel that no new FDI will come in the next six months apart from those in the pipeline,” the economist says, as coming events cast their shadows ahead.

“Political parties should try to avoid confrontation. The problem is political so the solution has to be political–and the politicians have to find the solutions.”

Apprehending a bleak situation on the economic front he mentions even a rickshaw-puller will be affected if the country has to embrace political turmoil.

“The domestic services sector, like hotels, restaurants, transportation, production, exports, investment, everything would be hard-hit if we cannot avoid political instability,” he cautions. And at the end of the day, the GDP (gross domestic product) growth would be undercut.

Economist Dr Selim Raihan, of SANEM, says in an uncertain situation investment will be affected as investors might not take the risk to pour in big money.

So there will be a slowdown in the economic activities, and if the uncertainty lingers and turns into confrontations, then definitely the potential investors would take more time.

“I hope that there would not be such a bad situation, but if that happens, it will also affect the mobility of people, causing disruption to transportation sector and economic activities. In that case, the economy will be highly impacted,” he forecasts on the domino effect of election politics on economics.

“Actually we do not know what the situation will be like. If the uncertainty cannot be averted, like foreign investment domestic investment will shy away too. Such an uncertainty is always harmful to investment.”

The economics professor goes on listing the downside odds and adversities. “You may notice that already the growth in private-sector credits has got lowered to a record level as the entrepreneurs are not encouraged in taking loans for new projects.

“Though we have seen a resilience in the economy as sectors like agriculture usually remain unaffected by political unrest, the urban informal sector and services sector which is closely linked with the low-income families will bear the brunt.”

In transport sector alone, there are thousands of such low-income employees. So they have to face immense sufferings.

“And economic activities will be contracted and it will affect the GDP growth,” he notes about feared fallout from politico-economic tantrums.


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