6pc growth attainable if next govt takes cautious steps: CPD

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FE Report
Bangladesh may achieve six per cent economic growth in the current fiscal if the next elected government takes cautious steps to confront the prevailing global financial meltdown, a local research firm Centre for Policy Dialogue (CPD) said.
"Present economic scenario shows that six per cent gross domestic product (GDP) growth is attainable if the new elected political government can take some perfect steps to overcome the financial dip," said CPD executive director Mustafizur Rahman at a press conference in Dhaka Tuesday.
The CPD, a local think-tank, has made the observation in its analysis on the "state of Bangladesh economy in the run-up to the national election 2008".
A debate on the government's 6.5 per cent GDP growth target for current FY09 has recently been emerged after World Bank projection of 5.4 per cent growth considering possible impact of global financial crisis on the economy.
The Bangladesh Bank (BB), however, criticised the forecast and said the country would achieve 6.5 per cent growth target overcoming the impact of meltdown.
"Macroeconomic performance will depend on how the economic scenarios in the second half of FY09 and global recession will impact on export, remittance, domestic resources mobilisation, capital market, foreign aid and foreign direct investment," said CPD chief Mr. Rahman.
CPD said 3.70 per cent growth target in agriculture sector and 6.5 per cent in service sector are achievable while 11.70 per cent in industrial sector could be affected due to absence of inadequate infrastructure development, especially for the ailing energy sector.
About the export earnings, the CPD said, export particularly from the ready-made garments (RMG) has demonstrated a dynamic performance, excepting in October.
"The orders in November for RMG indicate that the target of $16.5 billion export earnings in FY09 is achievable," Rahman said adding, "Much will depend on how Christmas sales go, whether the retailers are left with large inventories."
On the remittance target, the think-tank said there is uncertainties about sustaining the current buoyant remittance flow from US and European countries, moderate growth projection (5.3 per cent) in Middle-eastern countries could help achieve the target.
The "comfortable foreign financing position" in FY09 and "pick up of foreign direct investment (FDI)" have showed positive indications towards achieving the GDP growth, it said.
The country received US$395 million in net FDI and $5.0 million portfolio investment in the first quarter (July-September) of current FY09, which is higher than the corresponding period of last FY08.
CPD, on the contrary, has termed the declining public investment and falling trend in capital machinery import as setback for the targeted GDP growth achievement.
Thanking to the central bank's "accommodate monetary policy", the local research institution said BB has to craft a monetary policy that takes cognizance of inflationary pressure and provides required liquidity and incentives to stimulate production and growth for vibrant economic activities.
Mr. Mustafizur also emphasised on providing fiscal incentives to the farmers in next Boro season to engage them in rice cultivation for ensuring future food security.
"I think there will be a need for re-rationalisation of the fuel oil price in January-February period when a newly elected government will be in power," he said analysing the government's small cut in fuel prices on December 22
Mr. Rahman further said if the next elected government addressed the emerging economic challenges from the day-one, the country could overcome the external and internal shocks.
The CPD executive director identified 10 challenges that have to be faced by the next elected government in achieving the desirable economic growth.
The next government will need to facilitate next Boro rice production through providing fiscal incentives to the farmers, address the energy crisis, tame the inflation, keep the monetary sector under constant vigilance, he said.
"Besides, the government has to manage the impact of global financial crisis, monitor the NBR revenue earnings, revitalise the annual development programme, revisit the current national budget, clear the political stance on PRSP and continue with the institutional and regulatory reforms," he said.
Analysing the election manifestos of the political parties, the CPD chief said: "I don't think that it is impossible to execute the manifestos by the political parties. Those are possible and they will have to execute."
Mr. Rahman, however, said if the political parties explain their development programmes providing cost and sources of funds those will be more computable.