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Home Bangladesh

Bangladesh witness surge in construction investment

Surge in construction investment

Investment on the construction industry is growing

by Insider Desk
August 8, 2023

In recent times, Bangladesh has witnessed a remarkable surge in investment within its construction sector, driven by a rapid pace of infrastructure development. 

However, this expansion has led to a corresponding decrease in productivity across other sectors, marking a significant shift in the nation’s economic landscape.

The Gross Fixed Capital Formation (GFCF), a critical gauge of economic investment, has experienced a noteworthy upswing within Bangladesh’s construction sector. 

This surge is attributed to the nation’s intensive efforts in infrastructure development. 

This construction-focused growth has led to a proportional decline in more traditionally productive sectors.

The Bangladesh Bureau of Statistics (BBS), the nation’s premier statistical body, revealed that GFCF in sectors such as plants and equipment and transport equipment faced a decline in the previous fiscal year. 

According to BBS data, the GFCF for the fiscal year 2022-23, concluding in June, reached an impressive Tk 13.9 trillion at current prices, representing a substantial year-on-year increase of 9.0%.

Delving into the breakdown of GFCF, the BBS analysis highlights distinct contributions from both the public and private sectors. 

The public sector’s contribution amounted to Tk 3.3 trillion, while the private sector significantly bolstered the total with Tk 10.5 trillion.

The GFCF, serving as a valuable indicator, provides insights into capital expenditure trends within an economy. 

This encompassing measure encapsulates expenditures across construction, plant and machinery, transport equipment, and other relevant categories. 

While the construction sector asserts dominance with a significant 80.8% share, other segments exhibit notable fluctuations.

The fiscal year 2023 witnessed a decrease in plant and machinery expenditure growth by 5.8 percentage points, landing at 9.72%. 

Similarly, spending on transport equipment experienced a 5.2 percentage point decrease, settling at 5.99%. 

Moreover, expenditure in the ‘others’ category saw a remarkable decline of 15 percentage points, culminating at 3.54%.

Economists acknowledge Bangladesh’s status as a developing economy, emphasizing that construction dominance within expenditure patterns is only natural. 

The nation’s emphasis on real estate, road construction, and bridge development has significantly bolstered the construction sector’s substantial share of the GFCF.

In contrast, experts highlight a concerning trend in plant and machinery investment. 

Over the past four years, this sector has witnessed a downward trajectory largely attributed to the challenges posed by the COVID-19 pandemic. 

The GFCF, as a fluid expenditure measure, encompasses construction, machinery, transport equipment, and related sectors.

A BBS official provides insight into the methodology behind GFCF computation, affirming adherence to the United Nations national accounting system.

This method, a cornerstone of GDP measurement, ensures alignment with the latest System of National Accounts guidelines. As Bangladesh’s economic landscape evolves, the symbiotic relationship between construction growth and its impact on other sectors becomes increasingly prominent.

Tags: BangladeshFeaturedInvestmentinvestment in construction
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