Bangladesh's economy to grow at 6.5pc during 2007-09
Sunday, 21 October 2007
London-based Economist Intelligence Unit (EIU) has projected that Bangladesh's economy would continue to grow at 6.5 per cent during 2007-09 fiscal years, similar to that in 2006-07, reports UNB.
"The composition of growth in 2007-08 and 2008-09 will be similar to that in 2006-07, as record inflows of workers' remittances underpin activity in the services sector and the manufacturing sector continues to make a positive contribution", the EIU said in an outlook released recently.
Rates of growth in the agricultural sector, however, would continue to lag behind those in manufacturing and services in 2007-08, as the sector strives to overcome the devastation caused by the floods this year, which destroyed crops in more than one-half of Bangladesh's 64 districts, the EIU report said.
"Assuming normal monsoon rains in 2008, the agricultural sector is expected to make a strong recovery during 2008-09."
The economic growth is set to slow slightly from 6.5 per cent in 2006-07 to 6.2 per cent in 2007-08 as the agricultural sector tries to overcome the devastating effects of the recent floods.
The country report titled 'Bangladesh at a Glance: 2008-09' said the main near-term risk to economic growth is inflation, which stood at a 10-year high in September.
It said there are also signs that domestic and foreign investments have weakened over recent months. Domestic investors have been reluctant to expand capacity, with many wary of attracting the attentions of the Anti-Corruption Commission (ACC), which appears determined to investigate all cases of unexplained wealth.
Bangladesh's external environment is likely to become slightly less favourable in 2008 as economic growth in the US and Euro area --Bangladesh's largest export markets -- remains sluggish, the report further said.
The real GDP growth in the US, which absorbs around 24 per cent of Bangladesh's exports, is forecast to increase slightly, to 2.1 per cent, from an estimated 1.9 per cent in 2007.
By contrast, economic growth in the euro area (the destination of more than 30 per cent of Bangladeshi exports) is forecast to lose momentum, slowing from an estimated 2.5 per cent in 2007 to 2.2 per cent in 2008.
The external environment is expected to improve slightly in 2009 as economic growth in the US picks up to 2.8 per cent, but growth in the euro zone is forecast to remain sluggish.
"Despite a small increase in global crude oil production capacity, we doubt that OPEC will release enough oil on to the market to reduce the current imbalance between demand and supply. We expect oil prices (dated Brent Blend) to remain high in 2008, on an average at US$ 69/barrel, before falling to $63.3/barrel in 2009."
Due to the fact that Bangladesh imports nearly all of the crude petroleum that it needs, high international oil prices will have a detrimental effect on Bangladesh's balance of trade, and are expected to contribute to record trade deficits in 2008 and 2009.
About inflation outlook for the period, the EIU said price pressures are expected to persist throughout the forecast period, as the authorities attempt to reduce gradually the subsidy on domestic fuel prices against a backdrop of persistently high global oil prices.
"We expect consumer price inflation to average 7.7 per cent in 2008 before moderating slightly to 6.5 per cent in 2009", it said.
Food prices would continue to be inflated due to the hoarding of goods by local food merchants, and the rising cost of imports from India, which is a major supplier of food to Bangladesh via both formal and informal routes.
Assuming normal harvests for both India and Bangladesh, food price inflation should ease in 2009.
On exchange rate, it projected that following a modest depreciation of 1.4 per cent against the US dollar in 2007, the Bangladesh taka is forecast to fall by 3.7 per cent against the US dollar in 2008 and 3.0 per cent in 2009.
"We expect the exchange rate to average Tk72.5:US$1 in 2008 and Tk74.8:US$1 in 2009", the EIU report added.
"The composition of growth in 2007-08 and 2008-09 will be similar to that in 2006-07, as record inflows of workers' remittances underpin activity in the services sector and the manufacturing sector continues to make a positive contribution", the EIU said in an outlook released recently.
Rates of growth in the agricultural sector, however, would continue to lag behind those in manufacturing and services in 2007-08, as the sector strives to overcome the devastation caused by the floods this year, which destroyed crops in more than one-half of Bangladesh's 64 districts, the EIU report said.
"Assuming normal monsoon rains in 2008, the agricultural sector is expected to make a strong recovery during 2008-09."
The economic growth is set to slow slightly from 6.5 per cent in 2006-07 to 6.2 per cent in 2007-08 as the agricultural sector tries to overcome the devastating effects of the recent floods.
The country report titled 'Bangladesh at a Glance: 2008-09' said the main near-term risk to economic growth is inflation, which stood at a 10-year high in September.
It said there are also signs that domestic and foreign investments have weakened over recent months. Domestic investors have been reluctant to expand capacity, with many wary of attracting the attentions of the Anti-Corruption Commission (ACC), which appears determined to investigate all cases of unexplained wealth.
Bangladesh's external environment is likely to become slightly less favourable in 2008 as economic growth in the US and Euro area --Bangladesh's largest export markets -- remains sluggish, the report further said.
The real GDP growth in the US, which absorbs around 24 per cent of Bangladesh's exports, is forecast to increase slightly, to 2.1 per cent, from an estimated 1.9 per cent in 2007.
By contrast, economic growth in the euro area (the destination of more than 30 per cent of Bangladeshi exports) is forecast to lose momentum, slowing from an estimated 2.5 per cent in 2007 to 2.2 per cent in 2008.
The external environment is expected to improve slightly in 2009 as economic growth in the US picks up to 2.8 per cent, but growth in the euro zone is forecast to remain sluggish.
"Despite a small increase in global crude oil production capacity, we doubt that OPEC will release enough oil on to the market to reduce the current imbalance between demand and supply. We expect oil prices (dated Brent Blend) to remain high in 2008, on an average at US$ 69/barrel, before falling to $63.3/barrel in 2009."
Due to the fact that Bangladesh imports nearly all of the crude petroleum that it needs, high international oil prices will have a detrimental effect on Bangladesh's balance of trade, and are expected to contribute to record trade deficits in 2008 and 2009.
About inflation outlook for the period, the EIU said price pressures are expected to persist throughout the forecast period, as the authorities attempt to reduce gradually the subsidy on domestic fuel prices against a backdrop of persistently high global oil prices.
"We expect consumer price inflation to average 7.7 per cent in 2008 before moderating slightly to 6.5 per cent in 2009", it said.
Food prices would continue to be inflated due to the hoarding of goods by local food merchants, and the rising cost of imports from India, which is a major supplier of food to Bangladesh via both formal and informal routes.
Assuming normal harvests for both India and Bangladesh, food price inflation should ease in 2009.
On exchange rate, it projected that following a modest depreciation of 1.4 per cent against the US dollar in 2007, the Bangladesh taka is forecast to fall by 3.7 per cent against the US dollar in 2008 and 3.0 per cent in 2009.
"We expect the exchange rate to average Tk72.5:US$1 in 2008 and Tk74.8:US$1 in 2009", the EIU report added.