The Asian Development Bank (ADB) has forecasted a lower economic growth - at 6.1 per cent - for Bangladesh in the current fiscal year (FY), 2014-15, due to political impact, from its previous estimation of 6.4 per cent seven months ago.
In September, the Manila-based lender in its Asian Development Outlook (ADO) 2014 Update said Bangladesh's gross domestic product (GDP) will be expanded at 6.4 per cent rate in the current FY.
But the ADB Dhaka office in its Bangladesh Quarterly Economic Update, released on Tuesday, cut the projected growth projection.
"Prior to the onset of ongoing political unrest (first six months of FY 2015), the economy was growing briskly, indicating higher growth prospects for the current year… Although export remained subdued, it gradually improved, as export orders began to rise. The political unrest is undermining brighter growth prospects by affecting private investment and exports," said the economic update of the Manila-based lender.
The ADB's quarterly update said although the country is resilient to domestic and external shocks, GDP growth will be further affected, if the political unrest continues.
It also said poor investment scenario is also a major reason behind the lower GDP growth forecast of Bangladesh.
"The ongoing political unrest, if it lingers, will further decrease investors' confidence, and affect annual development programme implementation and revenue collection. It may affect macro-economic stability, pushing up inflation and affect the external balance."
Bangladesh needs to maintain political stability and improve the quality of governance to boost investment, ADB opined.
The economic update said increasing investment to 30 to 35 per cent of GDP is the major challenge to attaining a higher GDP growth trajectory. "To scale up investment, the falling trend of private investment during the last two years needs to be reversed."
ADB mentioned: "Private investment has been constrained by political uncertainty, land and infrastructure shortages, skill deficits, and a weak business climate. In terms of infrastructure quality, Bangladesh is less competitive relative to its potential contenders including Cambodia, China, India, and Sri Lanka."
The ADB report said the service sector's growth is expected to moderate to 5.7 per cent in the FY 2015 from 5.8 per cent in the previous year, as transport, trade, and wholesale and retail business activities have been affected by the unrest.
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