Economy to traverse a slow-growth path

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FE Report
Adverse effects of the global financial meltdown on exports, remittance and domestic demand situation would lead to 5.6 per cent (lowest in five years) growth of Bangladesh economy in the current financial year, compared 6.2 per cent growth in the previous fiscal, according to the Asian Development Outlook 2009.
The Outlook projects further economic slowdown in the next fiscal with the economy growing at 5.2 per cent in the backdrop of a global recession the duration of which is still unknown.
The government needs to streamline its expenditure to create more jobs to help poor get out of poverty, said Asian Development Bank (ADB) Bangladesh country director Paul J Heytens at the launching ceremony of the Outlook in the city on Tuesday.
"One of the development challenges of the government is to raise investment to enhance growth and job creation and thereby reduce poverty," he said.
Inflation is projected at 7.0 per cent and budget deficit at 4.7 per cent of GDP as the revenue collection would decelerate. However, balance of payments is expected to show a tiny surplus, 0.2 per cent of the GDP.
The key priorities of the government should be to increase investment in the public sector through annual development programme (ADP) and channel more funds to the market, Mr Heytens said.
Line ministries should have more institutional capacities to implement ADP and raise public sector infrastructure investment. The private sector must participate in infrastructure development through public-private partnership or other modalities, he added.
"Rural infrastructures including rural roads, irrigation facilities, and power and basic urban services are the areas the government can increase expenditure," he suggested.
The ADB country director said social safety net programme could be linked to rural infrastructure and job creating activities for long-term growth and poverty reduction.
The government should provide more support to small and medium enterprises (SMEs) for rapid growth and job creation, he said.
"Bangladesh was largely unaffected by the first round of the crisis, but the second round will have negative impact on the country," Mr Heytens said.
He did not specify when the second round would begin, but hinted that it might be felt when export and remittance would start falling.
M Zahid Hossain, head of Bangladesh country programming, said it is difficult to predict when the second round shock would come and what would be its magnitude, but the country should prepare itself for any adverse situation.
Agriculture sector is expected to grow 4.0 per cent if normal weather prevails and farmers get credit and farm inputs.
Farm productivity needs to be increased to maintain affordable price and to face food security threat in the future, Mr Zahid said.
About the shortage of power and gas, the ADB official said if the crisis is not addressed immediately it would hamper domestic production and hold back medium term growth prospects.
"The government needs to invest in the power sector as foreign direct investment in the sector is less likely in the recession period," he said.
Inflation is expected to fall at 6.5 per cent in the next fiscal as fuel and food prices have eased in the international market, but revenue collection will fall due to slower private sector activity and import.
Opening of letters of credit (L/Cs) declined by 2.3 per cent in the first seven months of the current fiscal and import payments are expected to grow by 18 per cent in the current fiscal as against 26 per cent in the last fiscal.
The Outlook projected growth of export at 14 per cent and remittance at 20 per cent in FY'09.
It warned that return of confrontational politics, natural disasters and reversal of economic and other reforms could disrupt economic activities.
"The new government needs to undertake further reforms in local governance and build local government capacity," it said.
The government should also incorporate climate change issue into its development planning to reduce poverty in a sustainable manner.