BB projects GDP growth downward to 6.2 per cent

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Siddique Islam
The central bank said the overall economic growth is likely to come down to 6.2 per cent from the targeted 6.5 per cent by the end of this fiscal due mainly to the ongoing global financial crisis.
"The country's gross domestic product (GDP) for the fiscal 2008-09 may come down near to 6.2 per cent from 6.5 per cent if the impact of the financial crisis is deeper," Chief Economist of Bangladesh Bank (BB) Mustafa K Mujeri told the FE Saturday.
The government in its budget document had predicted 6.5 per cent growth in the fiscal FY09 assuming that there would be no major natural disaster.
He also said the country's export sector particularly readymade garment (RMG) export is most vulnerable to the fallout effects of the financial crisis.
"We've estimated the latest GDP growth figure considering the ongoing financial crisis that may hit our export earnings particularly in RMG export," another BB senior official told the FE.
Despite positive growth in 2008, economic growth in countries like USA and the European Union (EU) is bleak in 2009, the central bank's policy analysis unit (PAU) said in a report, released Thursday last.
The policy paper styled 'Navigating the Global Financial Storm: Challenges for Bangladesh' also said this might affect both Bangladesh's export volume and export prices, but the impact on export prices is likely to be dominant in RMG sector.
"Since the RMG sector accounts for about 40 per cent of the country's manufacturing output and provides support to a variety of ancillary industries and services, analysis at PAU shows that, in the event of deeper slowdown in this dominant export industry, GDP growth would reduce to the lower bound (6.2 per cent) of PAU projection for FY09," the study added.
The PAU earlier indicated on the basis of its preliminary analysis that it would be possible to achieve GDP growth in the range of 6.2 per cent and 6.5 per cent in FY 09 following continuation of the favourable conditions and strengthening of growth-supportive policies.
"The potential adverse effects on the real economy need careful assessment," it said, adding that several direct and indirect social impacts may be set in requiring action and policy support to minimise the negative implications especially on the poor.
In the event of prolonged recession in the advanced economics, remittance growth from theses countries may face temporary setback, according to the study report.
"Based on assessments in future, the government may come up with an assistance package for export sector if the situation demands after identifying vulnerable sectors for adopting proper mitigation strategies," the PAU recommended in its study.
For RMGs, orders are not likely to dry up in the western markets. However, situations may arise in which the buyers may ask for longer credit periods and other facilities, it added.
"In order to meet such exigencies, if required, the BB can issue directives to banks to provide pre-and post-shipment credits for longer periods and allow rescheduling of loans," the PAU suggested.