Broad money growth decelerates in 2013

The broad money (M2) growth decelerated to 15.6 per cent (year-on-year) in December 2013 from 19.0 per cent in December 2012, according to a Bangladesh Bank (BB) report released Monday.
The report said the deceleration was the result of slower growth in net foreign assets as well as domestic credit during the October-December period.
In economics, broad money is a measure of the money supply that includes more than just physical money, such as currency and coins.
Broad money or M2 generally includes demand deposits with commercial banks, and any money held in easily accessible accounts. Components of broad money are still very liquid, and non-cash components can usually be converted into cash quite easily.
The report also said growth in the private sector credit had slowed to 10.6 per cent in December 2013, from 16.6 per cent in the previous year.
However, the central bank upgraded its economic growth forecast for fiscal year (FY) 2014, ranging between 5.8 per cent and 6.1 per cent.
The report said BB would update its forecasts on a regular basis during the course of the year and the monetary programme would also be flexible in accommodating any significant change in these forecasts.
The report noted the reserve money growth had declined to 13.3 per cent (y-o-y) in December, 2013, from 15.6 per cent in December, 2012.
The BB's FY 2014 Second Quarter report said economic activities in all sectors, especially the dominant services sector, got generally dampened due to political instability prevailing at that time.
It observed that the negative 8.87 per cent growth in remittance inflow compared to that of the same period in the previous fiscal year was also likely to have adverse effects on consumption and investment demand.
It also noted the annual development programme (ADP) utilisation had experienced a slow growth of 10.39 per cent compared to the same period in the previous fiscal year, while the private sector credit growth was only 10.6 per cent.
The report said a number of proxy indicators (trade financing, bank advances to transport and communications sectors, and the number of mobile phone subscribers) suggest a sluggish expansion of the service sector activities in the Quarter Two of the FY 2014 (Q2FY14).
It said point-to-point inflation had followed an upward trajectory during Q2FY14 due to rising food inflation, which had primarily been driven by higher rice prices at the retail level.
It said food inflation had reached 9.0 per cent in December, 2013.
In contrast, point-to-point non-food inflation has exhibited a consistently declining trend since November, 2012, and reached 4.88 per cent in December, 2013, partly due to the slowdown in economic activity.
However, the report found some brighter notes including rise in exports, which had registered a satisfactory growth of 11.88 per cent in Q2FY14 compared to Q2FY13, which has driven growth in manufacturing.
Bangladesh experienced a positive current account balance of US$ 1.11 billion in Q2FY14, about US$ 258 million higher than that of the same period last year.
A rise in export earnings largely contributed to this growth making up for the negative growth in remittances.
Foreign exchange reserves continued to expand - increasing to US$ 18.08 billion at the end of Q2FY14, compared to US$ 12.75 billion at the end of Q2FY13.
The BB report said preliminary estimates show that domestic revenue increased by 5.3 per cent during Q2FY14, whereas total expenditure grew by 13.3 per cent from that of the Second Quarter of FY13.