MCCI lists banking sector as a major risk to economy

Calls for strict vigilance by central bank


FE Report | Published: May 13, 2019 23:35:30


MCCI lists banking sector as a major risk to economy

The Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka has identified the present situation in the banking sector as one of the biggest risks to the economy and called for the central bank's strict vigilance to bring discipline in the sector.
"The corruption-ridden banking sector is perhaps the biggest downside risk now, which will call for strict vigilance by the central bank to bring discipline to the sector," the Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka said in its review of the 'Economic Situation in Bangladesh for January-March (Q3) period of the fiscal year (FY) 2018-19'.
Despite making certain progress, the economy of Bangladesh is also facing some other downside risks, including inadequate infrastructure, lack of investors' confidence and shortage of power and energy, according to the country's MCCI.
"Bangladesh's economy is progressing well, but below its true potential. Inadequate infrastructure and lack of investors' confidence discourage making fresh investment and shortage of power and energy is now among major impediments to the country's accelerated economic development," it said.
Despite the impediments, the economy has done exceptionally well over the past two decades, the MCCI added.
"Internationally accepted indicators of both economic and social progress have placed Bangladesh at the forefront of the developing world. Poverty has fallen and people's living standards have improved significantly," said the country's one of the leading trade bodies.
Citing the estimate of Bangladesh Bureau of Statistics (BBS), it said the country's GDP (gross domestic product) growth in the current fiscal (FY '19) is likely to be 8.13 per cent, up from 7.86 per cent in the past fiscal (FY '18).
The multilateral lenders that previously downgraded the country's growth projection to below 7.0 per cent have raised their projection to between 7.3 per cent and 8.0 per cent, according to the MCCI.
"Although their projections are well below the BBS estimate of 8.13 per cent, the forecasted growth rate, if successfully realised, would be no mean achievement when compared with the GDP growth of many other developing countries," said the trade body.
It further said improvements in the country's GDP growth have so far been the outcome of steady progress in the agriculture sector and food security, moderately good growth in industry despite the shortage in the power sector, and amid a decline in the inflation rate to a single digit.
Besides, macroeconomic stability, the build-up of a comfortable foreign exchange reserve, achieving most of the MDG (millennium development goal) targets, and good progress in achieving the SDGs, which the country is diligently striving to meet ahead of the 2030 timeline, also contributed to the GDP growth, it said.
Keeping this in view, the MCCI suggested that the prevailing downside risks that pose as big threats to its economic growth need to be carefully addressed.
"Power and gas shortage, insufficiency of investment and weak infrastructure are the major obstacles to growth, as they disrupt industrial production and also discourage new investment," the MCCI review said.
There are other downside risks such as poor implementation of public investment programmes (only 47.22 per cent of the annual development programme (ADP) has reportedly been implemented in the first nine months of the present fiscal), it mentioned.
The growing requirement of subsidy payments by the state to different sectors, uncertain availability of foreign aid, and growing income inequalities are also the challenging areas, it pointed out.
About the sectoral performances, the MCCI said the agriculture sector had performed well in the quarter under review (Q3 of FY19), which posted a robust 4.19 per cent growth in FY '18, compared to a moderate growth of 2.97 per cent in FY '17.
Mentioning that the detailed data on the broad industry sector or its sub-sectors are not available for the quarter under review, it said in FY '18, however, the broad industry sector managed to grow by 12.06 per cent, exceeding the growth rate in the previous fiscal by 1.84 percentage points, despite the shortage of energy, both gas and power.
The manufacturing sub-sector recorded 13.40 per cent growth in FY '18, which was 2.43 percentage points higher than the previous fiscal year's 10.97 per cent, according to the MCCI review.
Within manufacturing sector, the large and medium-scale industries sub-sector performed better than in the previous fiscal, growing at 14.26 per cent in FY '18, compared to 11.20 per cent in FY '17, it revealed.

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