The country’s credit growth in the private sector plunged again in May compared with that of the previous month as businesspeople are yet to get confidence back to expand their business amid political uncertainty, said officials of Bangladesh Bank. According to the BB data released on Thursday, the year-on-year credit growth rate in the private sector stood at 11.39 per cent in May against 11.86 per cent in April.
BB officials said that the credit growth in the private sector increased consecutively in March and April of this year, but the growth declined in May again due to lower confidence among the businesspeople.
Against the backdrop, the central bank may fail to achieve 16.50 per cent target of the private sector credit growth set in the monetary policy for January-June of this year.
Credit flow to the private sector stood at Tk 4,94,720.50 crore in May 2014 against Tk 4,44,153.40 crore in the same month of 2013. It was Tk 3,98,594.40 crore in May 2012.
The lower credit growth in the private sector has already put an adverse impact on the GDP target for the recently concluded financial year as Bangladesh Bureau of Statistics projected that the country’s GDP growth was 6.12 per cent for the FY14, much lower than the initial target of 7.2 per cent, a BB official told New Age on Thursday.
The violent political conflicts in the first half of the FY14 among the major political parties over the process of holding general elections hit the private sector, he said.
In the situation, the businesspeople adopted a ‘wait and see’ approach to expansion of their business in the period, he said.
The private sector credit growth hit a 14-and-a-half-year low at 10.60 per cent in December of 2013 compared with that of 16.61 per cent in the same month of 2012 due to the political unrest over the general elections.
The political uncertainty is still persisting among the businesspeople as the majority of the country’s political parties rejected the ‘one-sided national elections’ which was held on January 5, the BB official said.
For this reason, credit growth in the private sector may decline in the months to come if the uncertainty continues, he said.
‘In the latest budget for the FY15, the government set the GDP growth target of 7.3 per cent, but it will be a tough job for the government to attain the goal due to the ongoing sluggish investment trend,’ he said.
The country’s leading think-tank Centre for Policy Dialogue earlier said it was an impossible target to attain the 7.3 per cent GDP growth as the government would have to ensure 25 per cent private investment-GDP ratio.
The CPD said it would need a private investment of around Tk 75,000 crore in a single year to ensure four per cent growth in private investment-GDP growth.
Only political stability will push up the private sector credit growth, otherwise the businesspeople will continue to show reluctance to initiate new business, another BB official said.
Bangladesh Bureau of Statistics data earlier showed that private investment hit a seven-year low at 21.40 per cent in the FY14.
The private investment as a proportion to gross domestic product decreased to 21.40 per cent in the FY14 from 21.70 per cent in the FY13.
-With New Age input
