Citigroup projects economy to grow at 5.7pc in FY '09
FE Report | Sunday, 20 July 2008
The US-based Citigroup has projected Bangladesh's economy to grow at a lower 5.7 per cent in fiscal 2008-09 (FY09) due to slow investment and unfavourable global environment.
The projection is well below the gross domestic product (GDP) growth prediction of 6.5 per cent made for the current fiscal by the country's central bank.
"While growth in FY08 has held steady at 6.0 per cent, trends in FY09 could come in a shade lower, at 5.7 per cent," the Citigroup said in a report released recently.
The report also observed that the Anti-Corruption campaign has already resulted in week business sentiment and slow investment.
The Group sees further weakness in consumption and investment on the back of political uncertainty, muted export growth given the poor global environment and higher import due to rising food and fuel prices.
While growth in FY10 would be ascertained by how the global scenario pans out, trends are likely to remain at sub-6.0 per cent levels, the Group predicted.
"Although Bangladesh has delivered a steady growth rate over recent years, the current scenario of intensifying political uncertainty, rising prices and week global environment points to growth moderation in the coming year," the report added.
The Group also sees political uncertainty as elections draw closer. "As elections draw closer, rising political uncertainty is culminating in growing unrest and poor business sentiment," the report noted.
Earlier in the year, the three largest political parties refused to participate in the elections unless their leaders were released from prison.
On the external front, the trade deficit continues to come under pressure as imports rise on the back of higher oil and food prices, while growth in exports remain muted due to a weak global environment.
The country's overall trade deficit is expected to rise to US$5.5 billion in FY09 from $3.9 billion in FY 08, the report said.
The report also said higher food and fuel imports coupled with muted export growth are likely to bring the external sector under pressures in the year ahead.
Bangladesh Taka (BDT) has remained stable in recent months in spite of deteriorating trade balance due to considerable intervention by the central bank.
The Group, however, predicted that the BDT to weaken to Tk 72 against the US dollar in FY09 from Tk 68.9 level currently as the US dollar strengthens and the trade deficit continues to widen.
It also welcomed the government's move to divest shares of several state-owned enterprises (SOEs) and the reduction in corporate tax on listed companies that will greatly benefit the depth of the capital markets.
About the inflow of direct foreign investment (FDI), the Group did not see any significant rise in FDI until political uncertainties are resolved. However, liberalisation of norms, such as labour laws, and the coal mining policy could further encourage flows, it added.
The projection is well below the gross domestic product (GDP) growth prediction of 6.5 per cent made for the current fiscal by the country's central bank.
"While growth in FY08 has held steady at 6.0 per cent, trends in FY09 could come in a shade lower, at 5.7 per cent," the Citigroup said in a report released recently.
The report also observed that the Anti-Corruption campaign has already resulted in week business sentiment and slow investment.
The Group sees further weakness in consumption and investment on the back of political uncertainty, muted export growth given the poor global environment and higher import due to rising food and fuel prices.
While growth in FY10 would be ascertained by how the global scenario pans out, trends are likely to remain at sub-6.0 per cent levels, the Group predicted.
"Although Bangladesh has delivered a steady growth rate over recent years, the current scenario of intensifying political uncertainty, rising prices and week global environment points to growth moderation in the coming year," the report added.
The Group also sees political uncertainty as elections draw closer. "As elections draw closer, rising political uncertainty is culminating in growing unrest and poor business sentiment," the report noted.
Earlier in the year, the three largest political parties refused to participate in the elections unless their leaders were released from prison.
On the external front, the trade deficit continues to come under pressure as imports rise on the back of higher oil and food prices, while growth in exports remain muted due to a weak global environment.
The country's overall trade deficit is expected to rise to US$5.5 billion in FY09 from $3.9 billion in FY 08, the report said.
The report also said higher food and fuel imports coupled with muted export growth are likely to bring the external sector under pressures in the year ahead.
Bangladesh Taka (BDT) has remained stable in recent months in spite of deteriorating trade balance due to considerable intervention by the central bank.
The Group, however, predicted that the BDT to weaken to Tk 72 against the US dollar in FY09 from Tk 68.9 level currently as the US dollar strengthens and the trade deficit continues to widen.
It also welcomed the government's move to divest shares of several state-owned enterprises (SOEs) and the reduction in corporate tax on listed companies that will greatly benefit the depth of the capital markets.
About the inflow of direct foreign investment (FDI), the Group did not see any significant rise in FDI until political uncertainties are resolved. However, liberalisation of norms, such as labour laws, and the coal mining policy could further encourage flows, it added.