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BD economy to grow at 7.0pc in FY 18: ADB

FE Report | April 12, 2018 00:00:00

The Asian Development Bank (ADB) has projected a 7.0 per cent economic growth for Bangladesh in the current fiscal year (FY), 2017-18.

The national statistical body -- the Bangladesh Bureau of Statistics (BBS) -- has recently unveiled its provisional data, according to which Gross Domestic Product (GDP) is expected to expand at 7.65 per cent rate in the current FY.

The World Bank, another major development partner, at its Bangladesh Development Update, on Monday said national economy could grow at 6.5 per cent rate in FY 18, which is 1.15 percentage points lower than the BBS estimation.

"The GDP is expected grow 7.0 per cent in FY 18, as consumption demands slacken despite a rebound in workers' remittance," ADB Economist Soon Chan Hong said while presenting its Asian Development Outlook (ADO) in Dhaka on Wednesday.

ADO was published in all the Asian member countries of ADB Wednesday simultaneously.

He said the remittance beneficiaries are likely to adopt a cautious approach to spending, repaying debt incurred in the recent years of remittance decline.

The Manila-based lender also forecasted a higher trend of inflation. It said inflation is expected to accelerate to 6.1 per cent on an average in FY 18, and rise further to 6.3 per cent in the coming FY.

According to ADO: "Food inflation averaged just over 7.0 per cent year-on-year in the first half because of crop losses from flooding. But it eased from a peak of 7.9 per cent in September 2017 to 7.1 per cent in December with import of food grains and arrival of a newly-harvested crop in the market."

"Rice prices will nevertheless remain higher than last year. Non-food inflation has remained broadly stable, averaging 3.5 per cent in the first half of the year."

"But it is expected to be higher in the second half because of anticipated upward adjustment of natural gas and electricity prices, higher global oil prices, and taka depreciation," the report added.

ADB has also showed some downside risks for the economy at its outlook.

It said: "The current account deficit may deteriorate further, if the policies to rein in import demand do not succeed. Failure to boost revenue and tap foreign financing could unduly limit spending on needed infrastructure."

"Political uncertainty ahead of the national elections expected by December 2018 could undermine consumer and investor confidence."

"Fiscal risks from the influx of displaced people from Myanmar appear minimal, considering the assistance provided by the international relief agencies and others."

Finally, unfavourable weather is always a risk, according to ADO. Meanwhile, ADB Country Director in Bangladesh Manmohan Parkash said Bangladesh is doing well in terms of economic growth as well as poverty reduction.

He said it is true that the Gini-coefficient, a tool for measuring income inequality, has increased in Bangladesh. But its poverty cut has been impressive over the years.

As long as the country is in development stage, the income inequality can be seen for an interim period like other countries in the world, Mr Parkash said.

The ADB country chief suggested the government to boost its investment in infrastructure development and improving manpower.

When asked about the country's current banking sector incidents, he said most of the commercial banks had a credit risk assessment.

"I think many of the private banks are maintaining standard on the risk management."

Mr Parkash advised strengthening governance in the banking sector by ensuring better policies and structural reforms.

When asked about the development budget spending, the ADB country chief said he thinks that the government has right policies and capacity in implementing its development projects.

The Manila-based lender in its ADO also hailed some economic developments of Bangladesh.

It said the private investment is expected to edge up with support from an accommodative credit policy, and public investment will expand as the authorities seek to speed up implementation of the infrastructure projects.

"Export performance is expected to strengthen on projected higher growth in the euro area and in the US. However, net exports will not add to growth, as imports are expected to expand strongly with substantial restocking of food grains, rising fuel requirements, and a steady increase in imports of capital goods."

It added that broadly favourable global growth and trade prospects are expected to continue in FY 19.

"With a further strengthening of exports and remittances, GDP growth that year is expected to firm to 7.2 per cent in FY 19."

A marked stepping up of budget revenue mobilisation could fuel a somewhat stronger advance in investment and growth. But FY 19 budget policies will become known only when announced later, the outlook noted. ADB in its report, however, cautioned that despite rising remittances and exports, the current account deficit is expected to widen further to equal 2.2 per cent of GDP in FY 18 as import demand rises.

BDT depreciated by 4.3 per cent against the US dollar in February 2018 from the same period last year, and it is expected to depreciate further in response to the large current account deficit, ADO mentioned.

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