BB sets its sights high on GDP growth

Country's gross domestic product (GPD) will continue to grow at a steady rate, averaging annually 7.0 per cent in the near to medium term, the central bank says in an upfront economic analysis.
A spurt in domestic consumption and investment in mega-projects coupled with a modest economic recovery in the euro zone and the USA are seen as catalysts for the growth.           
 "Moderate recovery in the euro area and USA will have positive effect on growth provided that domestic private investment picked up," the Bangladesh Bank (BB) says in its annual report for the fiscal year (FY) 2014-15.
An expected increase in public consumption fuelled by the implementation of new pay scale, large infrastructure spending on power, road communications, and transportation and establishment of special economic zones (SEZ) will bring about a momentum in the GDP growth in the near to medium term, the BB says.
The central bank also expects the domestic demand growth to pick up steadily in the near and medium term as a result of improvements in business environment.
"Moreover, rapid growth in gross fixed capital formation in the public sector will continue to have a positive impact on growth of corporate capital expenditure," it noted in its annual report.
Investment will also be fuelled by the expected continuation of good financial standing of enterprises, allowing them to finance investment with their own funds, according to the report.
The central bank expects 14 per cent growth in imports, 7.5 per cent growth in exports and 10 per cent growth in remittances in FY 16.
The ongoing government efforts to boost overseas employment in Middle and Eastern Asian countries will accelerate inflow of remittances, the BB has expressed the hope.
The foreign-currency reserves are projected to keep rising to reach
US$ 26 billion in FY16 from US$ 25 billion in FY 15.
"However, Bangladesh's aspiration to become an upper-middle-income country by 2030 might prove realistic if its economy succeeds in overcoming the difficulties of supply-side disruptions due to political and non-political factors, financial scams, and cumbersome overseas employment process, etc," the central bank noted.
The BB also said the inflation as measured by consumer price index (CPI) will remain low in the short term. "Moreover, low inflation is supported by supply factors and the declining import prices."
Over the medium term the impact of these factors on inflation will gradually fade away, yet inflation is expected to remain below the government's projection (around 6.0 per cent) made in the 7th Five-Year Plan, according to the report.
The BB's monetary policy stance is expected to support the momentum of inclusive, equitable and environmentally sustainable growth, further consolidating inflation moderation and macroeconomic stability.
Banks and financial institutions are drawing on low-cost refinance windows of the BB against their financing of Micro, Small and Medium Enterprise (MSME) output initiatives and environmentally benign   green projects.
"The BB's supervisory oversight on credit disbursement and loan recovery disciplines in banks and financial institutions will intensify, with particular emphasis on risk management, internal audit and internal controls, accountability and transparency," the central bank's report hinted.
The FY16 monetary programmes project 16.5 per cent domestic credit growth against preceding year's 10.4 per cent actual, to accommodate 7.0 per cent real GDP growth with 6.2 per cent inflation.
The BB remains active in support of a market-based exchange rate regime while seeking to avoid high exchange-rate volatility.  
The central bank also says low-cost financial support from export development fund (EDF) and other funds will be provided to the exporters to expand productive capacity in textiles, apparels and leather sectors in order to accelerate export.
Besides, recent sustained pick-up in investment and consumption imports will ease appreciation pressures on Bangladesh Taka in the near future, enhancing its export competitiveness, it added.  
[email protected]