Bangladesh may achieve a 6.2 percent GDP growth this current fiscal year because of a steady rise in investment, particularly in power sector, a recent Citi report has forecast.
The FY 2010-11 GDP growth target has been set at 6.7 percent. Such growth was 6 percent a year earlier.
The report, Asia Macro and Strategy Outlook, said their forecasts are more conservative than Bangladesh government.
The reasons they showed are the challenges in meeting the 1500-megawatt power shortage, possible labour unrest, sluggish export demand in two major export destinations, such as United States and European Union, and natural calamity.
Citi, however, linked the achievement in its estimated growth in gross domestic product to the rising growth trend of industrial and services sectors, backed by the government’s investment in infrastructure development.
The report also pointed to the recent approval of a bill to expedite energy sector contracts and power purchase agreement with the private sector, which reflects efforts to resolve the crisis.
“Private consumption will increase due to wage revisions for the textile sectors and stable remittance inflow.”
The report expects the export growth to remain positive over the import due to growth in textile sector but warns against poor market diversification.
The trade deficit of the country, according to Citi, may increase to 42,900 crore in the current fiscal year due to the increasing negative balance of trade.
In case of budget deficit, the report expects the deficit by 2012 to narrow to 4.8 percent as government has a proved track of compressing the deficit target.
“Like other fiscal years, Bangladesh is expected to meet the budget targets as it has lower spending than the target on annual development programme.”
The consumer price index will remain at 7.2 percent this year and in the next year it may come down to 6.7 percent, said the report.
Citi assumed that the central bank will also tighten the monitory policy to neutralise the inflationary pressure.
