Falling remittance inflow registers a negative growth that might cast some dampening effects on domestic demand, according to the central bank.
An expected growth in private-sector credits and a fresh wave of capital-machinery import indicated buoyant domestic demand, the Bangladesh Bank observed in its latest quarterly report on the country's economic health.
"However, the negative growth of remittance inflow (-17.8 per cent) might have some dampening effect on the domestic demand," it says in the Bangladesh Bank Quarterly (BBQ) for October-December 2016 period, released Sunday.
The latest BB observations came against the backdrop of a falling trend in the flow of inward remittances in the recent months.
Talking to the FE, a BB senior official said the inward remittance flow dropped significantly in the recent months following a sluggish trend in economic activities in the Middle-East countries coupled with a rising trend in the sending of hard-earned money by expatriate Bangladeshis through informal channels.
"The overall economic growth may face an adverse impact in future if the existing downward trend in inward remittance continues," the central banker explained.
He said the central bank as well as the government has got down to working on ways of enhancing the inflow of remittances immediately.
As part of the moves, two teams of the BB are now working to find out reasons of the downturn in remittance inflow in the recent months.
The teams had visited the Kingdom of Saudi Arabia, Singapore and Malaysia to see the actual situation with the remittances from those countries.
"We're still working on the issue," a senior member of a team told the FE, adding that a report will be submitted to BB Governor Fazle Kabir in this connection by the end of this month.
The overall remittance inflow has dropped by nearly 17 per cent or US$ 1.86 billion in the first nine months of this fiscal year (FY), 2016-17, against the same period of the previous fiscal.
The remittance receipts came down to $9.19 billion during the July-March period, from $11.06 billion in the same period of the last fiscal, the latest BB data showed.
The inflow was estimated at $1.08 billion in March 2017, up by $136.69 million from that of the previous month. In February 2017, the amount stood at $940.75 million. It was $1.28 billion in March 2016.
The banking-sector indicators depicted a mixed picture in the second quarter of the current fiscal year (FY) 2016-17 compared to that in the Q2 of the FY 16.
"Capital-to-risk-weighted asset ratio (CRAR) and asset quality (in terms of both gross and net NPL ratios) showed some improvements, while profitability (both ROA and ROE) and the provision-shortfall position of banks against classified loans deteriorated during the quarter under review," the BBQ noted.
Looking ahead to FY 17, the BB's current forecast is that output growth is likely to be more than 7.0 per cent.
This was based on current and projected trends in a number of variables, including global economic growth, domestic and foreign investment, private-sector-credit growth, electricity production and growth in capital-goods imports.
"However, the downside risk to this projection may stem from the dip in remittance inflow and moderate export growth," the central bank noted.
Though the current level of inflation measured by the consumer price index (CPI) on the basis of 12-month average is below the target, point- to-point non-food inflation has already been rising since July 2016.
And this rise might put some upward pressure on average inflation in coming months, the BB hinted.
During the period under review, the overall economic activities witnessed a strong growth impulse, stemming mainly from the industry and the service sectors.
The large-and medium-scale industries' output registered a double-digit (13.8 per cent in October 2017) growth, aided by continued improvement in electricity supply and falling lending rates, according to the BBQ.
siddique.islam@gmail.com
