Economists, businessmen say low growth ominous sign for economy
The credit growth in the private sector declined to below 14 per cent in February on year-on-year basis for the first time since the financial year 2009-10 due mainly to the recent political unrest, said economists, businessmen and bankers. They said that such low credit growth in the private sector was an ‘ominous sign’ for the country’s financial stability and prospect as at least 20 per cent growth in the private sector credit was needed for achieving desired economic growth.
According to the Bangladesh Bank data released on Thursday, the credit growth in the private sector slumped to 13.96 per cent in February compared with that of 19.55 per cent in the corresponding month of 2012.
The private sector credit in February stood at Tk 4,33,628.50 crore against Tk 3,80,511.70 crore in the same month of 2012.
The central bank took a slightly expansionary monetary policy for the January-June of 2013, setting a credit growth target of 18.50 per cent for the period amid repeated demand from the businesspeople.
The BB data showed that the credit growth in the private sector also declined to 6.31 per cent in July-February of the FY 2012-13 compared with that of 11.68 per cent during the same period a financial year ago.
A BB official told New Age on Thursday that the lowest credit growth in the private sector in February since the FY 2009-10 indicated that the country’s investment sector was now facing a dreadful situation.
Dhaka University economics department chairman MA Taslim said that it would be difficult for the government to cross 6 per cent gross domestic products growth because of the massive decline in the private sector credit growth.
The government has set a GDP growth of 7.2 per cent for the current financial year.
The import of capital machinery and industrial raw materials, which are required to expand the industrialisation, registered a negative growth in the first eight months of the FY 2012-13 which will ultimately affect the GDP growth, he said.
‘The ongoing political turmoil has hit the private sector credit growth as businessmen have taken a “wait and see” policy in expanding their business.’
The local and foreign investments will decline further in the months to come if the political violence persists, Taslim said.
Former Dhaka Chamber of Commerce and Industry president Asif Ibrahim said that the country’s investment sector was now facing crisis due to the recent political unrest.
Businessmen are now reluctant to make fresh investment amid the depressing political situation, he said.
‘So, the credit growth in the private sector declined significantly,’ he said adding that the high interest rate on banks’ lending was another cause of the lower credit growth.
The credit growth in the private sector should be 20-22 per cent, he said.
The BB data showed that the credit growth in the overall domestic sector slumped to 13.37 per cent in February compared with that of 24.13 per cent in the corresponding month of 2012.
The total credit in the domestic sector in February stood at Tk 5,54,799.30 crore against Tk 4,89,354.40 crore in the same month of 2012.
-With New Age input
