BB hopeful about near-term economic turnaround
Monday, 11 February 2008
FE Report
The Bangladesh Bank (BB) sees the near-term outlook of the country's economy favourable because of its potential of making strong recovery.
The central bank has made the positive observation despite the negative impact of the two consecutive floods and the cyclone last year and the risk of rising inflation in the economy.
The positive near-term outlook, however, is underpinned by continuous pursuit of supportive macroeconomic polices; heightened business confidence, implementation of ongoing structural as well as financial sector reforms, reasonable socio-political stability and policy continuity in the backdrop of general election scheduled in late 2008.
"It is also important to ensure rapid rehabilitation of livelihood activities in the flood and cyclone affected areas so that the adverse impact of the disasters are mitigated within the shortest possible time, production losses are recouped and the supply of essential productions increased to create positive impact on food and essential commodity prices," the central bank said in its quarterly for October-December 2007, released Sunday.
The supply side factors would play the major role in moderating the inflationary pressure in the economy and setting the course of inflation during the rest of the fiscal 2007-08 (FY08), according to the quarterly.
"BB's policy stance would be to support increased output growth in the domestic economy especially in agriculture sector and keep demand side pressures under control so that inflation expectations remain subdued," it noted.
The central bank has already revised the projection of gross domestic product (GDP) growth rate downward ranging between 6.0 per cent and 6.2 per cent for the current fiscal.
The Policy Analysis Unit (PAU) of the BB earlier projected the growth rates between 6.2 per cent and 6.5 per cent for the current fiscal.
"This growth outlook is depended on measures by the government to address the emerging constraints," the quarterly said, adding that the country's near-term growth prospects would become brighter through rapid and effective implementation of policy strategies and reform programmes taken by the government.
"The continuation of polices are important to achieve the growth target by the end of the current fiscal," Chief Economist of the BB Mustafa K Mujeri told reporters.
He also said the central bank strongly believes the revised growth rates will be achievable and there is no need to review the growth target further.
"We see the overall economic activities are picking up slowly. It will pick up further in the near future," he observed.
The country's overall consumers' price index (CPI) inflation stood at 11.59 per cent on the point-to-point basis in December last from 11.21 per cent in November 2007 because of the increase in the prices of the food items.
The pressure of food prices in urban areas was higher than in the rural areas during the period. Food inflation in urban areas stood at 15.77 per cent in December against 15.50 per cent a month ago on the point-to-point basis.
In rural areas, inflation on food items also rose to 13.91 per cent in December last from 13.13 per cent in November 2007, according to the Bangladesh Bureau of Statistics (BBS) data, released recently.
On the other hand, the inflationary pressure on non-food items was higher in the rural areas than in the urban areas during the period under review.
In rural areas, inflation on non-food items reached at 7.52 per cent in December last while 6.62 per cent in the urban areas.
"The inflationary gap between rural and urban areas should be reduced through implementation of proper policy guidelines," Mujeri added.
He also said the central bank has already announced its new monetary policy to curb the existing inflationary pressure through increasing the overall domestic productions.
The Bangladesh Bank (BB) sees the near-term outlook of the country's economy favourable because of its potential of making strong recovery.
The central bank has made the positive observation despite the negative impact of the two consecutive floods and the cyclone last year and the risk of rising inflation in the economy.
The positive near-term outlook, however, is underpinned by continuous pursuit of supportive macroeconomic polices; heightened business confidence, implementation of ongoing structural as well as financial sector reforms, reasonable socio-political stability and policy continuity in the backdrop of general election scheduled in late 2008.
"It is also important to ensure rapid rehabilitation of livelihood activities in the flood and cyclone affected areas so that the adverse impact of the disasters are mitigated within the shortest possible time, production losses are recouped and the supply of essential productions increased to create positive impact on food and essential commodity prices," the central bank said in its quarterly for October-December 2007, released Sunday.
The supply side factors would play the major role in moderating the inflationary pressure in the economy and setting the course of inflation during the rest of the fiscal 2007-08 (FY08), according to the quarterly.
"BB's policy stance would be to support increased output growth in the domestic economy especially in agriculture sector and keep demand side pressures under control so that inflation expectations remain subdued," it noted.
The central bank has already revised the projection of gross domestic product (GDP) growth rate downward ranging between 6.0 per cent and 6.2 per cent for the current fiscal.
The Policy Analysis Unit (PAU) of the BB earlier projected the growth rates between 6.2 per cent and 6.5 per cent for the current fiscal.
"This growth outlook is depended on measures by the government to address the emerging constraints," the quarterly said, adding that the country's near-term growth prospects would become brighter through rapid and effective implementation of policy strategies and reform programmes taken by the government.
"The continuation of polices are important to achieve the growth target by the end of the current fiscal," Chief Economist of the BB Mustafa K Mujeri told reporters.
He also said the central bank strongly believes the revised growth rates will be achievable and there is no need to review the growth target further.
"We see the overall economic activities are picking up slowly. It will pick up further in the near future," he observed.
The country's overall consumers' price index (CPI) inflation stood at 11.59 per cent on the point-to-point basis in December last from 11.21 per cent in November 2007 because of the increase in the prices of the food items.
The pressure of food prices in urban areas was higher than in the rural areas during the period. Food inflation in urban areas stood at 15.77 per cent in December against 15.50 per cent a month ago on the point-to-point basis.
In rural areas, inflation on food items also rose to 13.91 per cent in December last from 13.13 per cent in November 2007, according to the Bangladesh Bureau of Statistics (BBS) data, released recently.
On the other hand, the inflationary pressure on non-food items was higher in the rural areas than in the urban areas during the period under review.
In rural areas, inflation on non-food items reached at 7.52 per cent in December last while 6.62 per cent in the urban areas.
"The inflationary gap between rural and urban areas should be reduced through implementation of proper policy guidelines," Mujeri added.
He also said the central bank has already announced its new monetary policy to curb the existing inflationary pressure through increasing the overall domestic productions.