Economy set for bumpy ride in '08

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Bangladesh is on a rocky path. The economy went through a string of stresses through 2007 and the makeshift government composed of technocrats and backed by the army, struggled to keep up the pace of growth, reports bdnews24.com.
Soaring prices of essentials, food grains and fuel oils and an abnormal rise in inflation, erosion of business and consumer confidence, twin floods and the deadly cyclone hit the economy hard in 2007.
"Bangladesh is really going through a very difficult time and challenges. The current year is the most critical in Bangladesh's history," Asian Development Bank (ADB) Country Director Hua Du said during the launch of ADB's quarterly economic update late last month.
Economic growth probably reached a five-year low in 2007, analysts and Bangladesh's development partners feared.
The International Monetary Fund (IMF) in September forecast that economic growth would be at 5.5 per cent because of floods and the ongoing anticorruption drive.
The IMF had made the prediction before the cyclone Sidr struck Bangladesh on November 15.
Other development partners including the World Bank (WB) also estimated lower growth-below 6.0 per cent instead of 7.0 per cent projected in the budget for fiscal 2007-08.
The economy has been growing on an average over 5.0 per cent for the last one decade. The growth was above 6.0 per cent since 2003-04 except 5.96 per cent in 2004-05 because of floods.
The central bank also recast the growth at 6.2-6.5 per cent for fiscal 2007-08, down from 7.0 per cent in the wake of floods and the cyclone.
Unnayan Shamunnay, a private think-tank, also forecast in a recent economic outlook that the country's growth would be around 5.5 per cent this fiscal year.
The reduction was paced by some major factors such as hikes in fuel and food prices on the international market, erosion of business confidence, natural disasters and lower farm output, said Zaed Bakht, research director of Bangladesh Institute of Development Studies (BIDS).
Global crude oil prices near $100 a barrel added to budgetary and inflationary pressures. The fuel price adjustment in April was done when oil was selling at $65 a barrel.
Losses at state-run Bangladesh Petroleum Corporation (BPC), the lone importer and distributor of oil, were estimated at $749 million or 1.1 per cent of GDP in the fiscal year to June 2008, the ADB said.
"The government has to subsidise fuel imports by Tk 60 billion (6,000 crore) instead of estimated Tk 25 billion (2,500 crore) because of unexpected hikes in prices on the international market," a senior Energy Ministry official told the news agency, asking not to be named.
Prices of rice and wheat both on the international and domestic markets also marked a significant rise in 2007.
On point-to-point basis, inflation reached 10.10 per cent in July.
A number of natural calamities-floods and cyclone-cost the country huge losses. Crop losses have been estimated at 1.8 million (18 lakh) tonnes, which has forced the government to import rice.
The combined losses to assets and output were estimated at $1 billion, or 1.4 per cent of GDP, said the Manila-based bank. The WB put it at about $3.0 billion.
"Still agriculture contributes hugely (21 per cent of GDP) to our economic growth. Crop losses due to the cyclone and floods will certainly lower this year's economic growth forecast," Zaid Bakht said.