A broad-based growth momentum across the economy continued during the first two quarters of this fiscal while banking system on the financial front witnessed contraction for savings squeeze by inflation.
This is how the central bank portrays Bangladesh's latest mixed economic performance amidst a rebound from global crises.
The Bangladesh Bank quarterly says the economic-growth momentum hinged upon the performance of the agriculture and service-related sectors aided by supportive monetary and government policy measures.
Released Monday, the BB report for the second quarter (October-December) of the ongoing fiscal forecasts that the overall growth momentum of Bangladesh economy is expected to continue on the back of prompt policy initiatives of the central bank and the government.
It says the inflationary situation in Bangladesh is anticipated to soften again on the back of improved inflation scenario of the major trading- partner economies.
However, the outlook is subject to considerable uncertainties which could emerge from the continuous unfavorable global developments, including the Russia-Ukraine war and the tight global financial condition- led costs, among others.
Nevertheless, BB will continue to carefully monitor such developments that might affect the growth prospects.
About the banking system, it says liquidity condition in banking sector kept worsening because of a host of reasons such as continuous dollar sale by the Bangladesh Bank (BB), declining remittance trend, growing inflationary pressure.
In addition, hike in BB's policy rates to curb inflationary pressure also casts impact on liquidity in banking sector, the central bank's quarterly reads.
The overall banking sector showed a mixed performance in Q2FY23, as evidenced by a reduction in the ratio of non-performing loans (NPLs) to total loans and a declining trend in the growth of both bank advances and deposits, a deterioration in maintaining provision and a deceleration of excess liquidity in the banking system.
The ratio of gross non-performing loans to total loans declined in Q2FY23 compared to Q1FY23, mostly due to state-owned commercial banks (SCBs) and private commercial banks (PCBs). Moreover, the ratio of net nonperforming loans decreased in Q2FY23 compared to Q1FY23, following two consecutive quarters of steady growth, mostly due to state-owned commercial banks (SCBs).
The non-performing loans in the banking sector showed an improvement in Q2FY23, mostly due to favorable loan-repayment policies confronting the ongoing macroeconomic stress. The ratio of gross NPLs to total loans declined to 8.16 percent at the end of Q2FY23 from 9.36 percent at the end of Q1FY23.
The gap in growth between bank deposits and advances widened significantly at the end of Q2FY23. Although, bank advances maintained a moderate growth of 14.1 per cent at the end of Q2FY23, deposit growth further deteriorated.
The banks' deposit growth fell to 5.6 per cent at the end of Q2FY23 from 7.8 per cent at the end of Q1FY23, reflecting weaker savings owing to high inflationary pressure. Consequently, the overall advance-deposit ratio (ADR) rose to 79.00 per cent in end-December 2022 from 76.23 per cent in end-September 2022, and remained broadly stable.
The banking sector's profitability witnessed an improved trend in Q1FY23 compared to Q1FY22, as reflected by an uptick in both returns on asset (ROA) and returns on equity (ROE), mostly stemming from an improvement in the NPLs in the banking sector in Q2FY23.
The surplus liquidity in the banking sector has further declined to Tk 1457.28 billion (1.46 trillion) at the end of Q2FY23 from Tk 1703.2 billion at the end of Q1FY23, partly due to BB's intervention in the foreign-exchange market by selling USD amid the Russia-Ukraine war and higher demand for credits.
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