Bangladesh’s economic growth may come down to 6 percent in the current fiscal year due to sluggish exports and a decline in domestic demand, the Asian Development Bank has said.
The lender launched its Asian Development Outlook 2012 in Bangladesh and throughout Asia Pacific yesterday. GDP (gross domestic product) rose by 6.3 percent and the government’s target is 7.2 percent for the current fiscal year.
However, the ADB said inflation will fall by 2 percentage points and stand at 8.5 percent on average in the current fiscal year compared to that in the last fiscal
year.
“Export growth is expected to remain low in the first half of fiscal 2013,” said ADB Country Director Teresa Kho at a press conference at the organisation’s office in
Dhaka yesterday.
Growth in domestic demand is also likely to stay limited because of the central bank’s continued credit tightening, Kho said.
Mohammad Zahid Hossain, principal economist of the ADB in Bangladesh, made a presentation on the latest situation of Bangladesh’s economy at the press conference.
Hossain said a financial crisis in the European Union is affecting Bangladesh’s exports.
Echoing the view of the ADB country director, he said credit tightening by the central bank will slow domestic demand.
“The expected rise in remittances will not be strong enough to fully offset it.”
Hossain said sectoral GDP growth in the services and industries sectors will be slow in the current fiscal year but growth in the agriculture sector will almost double
compared to that in the last fiscal year.
About inflation, he said upward adjustments in the fuel and electricity prices at home will lift non-food inflation.
But inflationary pressures will be contained as central bank’s credit tightening measures take hold.
He also said the international prices of commodities, including that of fuel, are expected to be broadly stable.
Hossain said food prices are expected to fall in the first half with comfortable domestic supply, but will go up in the second half as drought in a number of major
agricultural suppliers cuts global supplies.
The ADB said remittance growth will be 12 percent in the whole year as more workers leave for the Middle East countries.
The prevailing oil prices support the construction projects in those countries that engage the bulk of unskilled Bangladeshi workers.
However, the ADB said several downside risks could upset the projections.
It said fiscal management could come under pressure if the revenue target is not realised and planned foreign financing does not materialise.
If political pressures quash the expected increases in fuel and electricity prices, it may also strain fiscal management, the ADB said.
The lender also said the monetary discipline could be undermined if the government increases bank borrowing to finance subsidy spending.
Finally unfavourable weather or political unrest could affect economic activities, it said.
The ADB country director said it is important to enhance macroeconomic stability in the short-term and strengthen internal and external balances.
Kho also said ensuring adequate credit for the private sector is a priority.
Policy actions at the same time should focus on keeping inflationary pressures in check, she added.
-With The Daily Star input
