IMF revises GDP growth projection down to 5.0pc

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FE Report
The International Monetary Fund (IMF) has projected Bangladesh's GDP (gross domestic product) growth at 5.0 per cent for the current fiscal year against the government's anticipated rate of 6.0 per cent.
"The IMF's outlook in the fiscal year (FY) 10 is broadly unchanged. The real GDP growth is expected to moderate slightly to 5.0 per cent, mainly due to sluggish exports," David Cowen, the IMF mission chief, told a press briefing Monday after concluding his team's week-long visit to Bangladesh.
IMF resident representative in Bangladesh Etari Kvintradze was also present at the press briefing held at Bangladesh Bank (BB) conference room.

The country's GDP growth might rise to around 6.0 per cent in FY 11 with more supportive external conditions anticipating, he said.
When his attention was drawn to the government's projection of 6.0 per cent GDP growth, Mr David said: "The government has its own growth projection mechanism…We have projected the growth rate taking all the prevailing conditions into consideration."
The multilateral lender also projected the rate of Bangladesh's annual average inflation at 8.0 per cent for the FY 10 due largely to higher food and fuel prices.
He also suggested that the Bangladesh Bank should continue to monitor in order to help check the inflation.
The IMF mission also pinpointed strong ADP (annual development programme) implementation and private investment as major challenges for Bangladesh.
On the other hand, the water and power supply disruptions are the downside risks that have the potential impact on manufacturing and agriculture, said Mr David.
He also observed that the current account should continue to remain surplus both this year and next, although the pace of growth in foreign reserves may slow in FY'I I on expected moderate increases in remittances.
On the upcoming budget, the IMF mission head said the FY'I 0 outturn is expected to be moderately expansionary, but ADP implementation is expected to be less than budgeted.
In this context, the FYI I budget should aim at raising tax revenues and increase ADP implementation to boost the economy 's medium-term growth potential and accelerate poverty reduction, he suggested.
"Ongoing efforts to broaden the income tax base could deliver sizable revenue gains. However, prospects for broader revenue growth hinge on other decisive actions to strengthen tax policy and administration, notably in line with the new VAT law expected to be introduced in FY'I 1," he said.
He also observed that the government's expenditures would need to be prioritised to ensure the necessary resources to resolve infrastructure bottlenecks.
In this vein, direct and implicit subsidies should be better targeted to vulnerable groups to ensure adequate fiscal space in other areas and allow fuller cost recovery by service providers, especially in the power and energy sectors, Mr. David said.
He also suggested stronger efforts for streamlining project approvals and implementation capacity and developing an effective framework for public-private partnerships in infrastructure development.
In support of economic activity, monetary conditions remain relatively lax, but recent signs point to some tightening, he said, adding banks' excess liquidity has been reduced substantially as a result of a pickup in lending.