Economy likely to grow by nearly 6.0pc: MCCI
Tuesday, 11 May 2010
FE Report
The Metropolitan Chamber has forecast that the country's GDP (gross domestic product) is likely to grow nearly by the projected 6.0 per cent in the current fiscal year (FY), driven by favourable service sector growth, stable domestic financial market and signs of global recovery.
"Despite the slight under-performance of the leading sectors, it can be said that the growth momentum in Bangladesh economy continued in the January-March quarter of FY10, benefiting from the global recovery and the stability in domestic financial markets that stimulated demand for increased private sector credit," the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) said in its January-March quarterly review.
The review also said the growth was broad-based, across the export-driven manufacturing sector such as jute and woven garments, leather and -agro process, and food processing, as well as the domestic-oriented industries such as food processing, cement and pharmaceuticals.
It, however, said price pressures in the quarter under review increased, in tandem with global inflation, but average inflation remained within the target range.
"The fragility of Bangladesh economy increased in the quarter due to the huge gap between demand and supply of the basic infrastructure, the MCCI review said adding the uncertainty surrounding the energy sector problems could adversely affect business sentiments and interrupt the rebound of private investment.
The Chamber urged the government to redouble its efforts in improving the quality and management of basic infrastructure expenditures and provide energy at low cost to everyone.
"Investment in productive energy is of paramount importance in helping achieve the government's goal of establishing market-based export economy," it said.
The MCCI review revealed that the average rate of inflation (12-month annual average CPI) rose to 5.95 per cent in Q3 (February 2010) from 5.42 per cent of the previous quarter.
The rate of inflation on point-to-point basis increased to 9.06 per cent in February from 8.51 per cent in December, it said adding, "This was the highest point-to-point inflation in sixteen months."
The chamber said the decline in non-food inflation since the second quarter of the current fiscal as is indicated by BBS data defies all logic.
"It is not clear why or how, despite the perceived operation of the income effect of increased public sector salaries and the price effect of global price increase in fuels, and domestic price increases in electricity and gas, and the sharp rise in asset prices (real estate and stock exchange securities), non-food inflation did fall in the period under review," it added.
Regarding foreign exchange, the review said the exchange rate of Taka per US dollar underwent an overall depreciation of 0.18 per cent in the quarter in comparison with Q2 FY10.
"The Taka depreciated by 0. 12 per cent in January and 0.13 per cent in February but in March the Taka marginally appreciated by 0.07 per cent," it said.
At the end of the third quarter of the fiscal, foreign exchange reserve stood at $10.160 billion, an increase of $4.470 billion or 77.1 per cent increase over the reserve of $5.953 billion recorded at the end of the corresponding third quarter of FY09, it added.
The review said that the inward remittances in Q3FY10 stood at $2738 million, compared to $2529 million in the corresponding quarter of FY09 - an 8.2 per cent y-o-y increase and the commodity trade balance recorded a lower deficit of $226 million in January 2010 compared to the deficit of $465 million in January 2009.
"The over-all balance of payments showed a surplus of $57 million in January 2010, compared to a deficit of US$129 million in January 2009."
On the external front, merchandise exports in January of Q3FY10 increased year-on-year by 3.49 per cent compared to 1.0 per cent in Q2FY10, the review said.
This indicates that the global demand is gradually improving, which resulted in improving export performance especially in raw jute, jute products, leather, petroleum byproducts, bicycle, footwear, agro processed food, terry towel and ceramic products, it added.
The review, however, said while export receipts recorded a positive growth in January 2010, total export receipts during July-January 2009-10 fiscal was 4.96 per cent lower than in the corresponding seven months of the previous fiscal.
"Total import payments (CIF) in January Q3FY10 stood at $1841 million, lower by $227 million or 10.96 per cent than $2067 million in January 2009."
The 10.96 per cent contraction in import payments is in sharp contrast with the observed 9.5 per cent increase in the previous quarter, the MCCI review said.
In the third quarter, total NBR tax collection grew by 14.7 per cent compared to 10.7 per cent in the same quarter of the pervious year, the review said adding, "The development was unfavourable compared to 26.6 per cent growth in the previous quarter."
Total budget financing of the government during July-January 2010 through borrowing stood lower at Tk 34.65 billion, as against Tk 133.71 billion during the same period of the last fiscal, the review said.
'The amount of budget financing was just 11.9 per cent of the total target of Tk. 292.28 billion for the entire fiscal year (FY10)."
The disbursement rate of government spending during the quarter under review declined compared to the previous quarter, the chamber said in its review.
"Despite the government's effort to accelerate spending, implementation of various projects was hindered by administrative inefficiency," it added.
The outstanding domestic debt of the government stood at Tk. 957.60 billion in January 2010, which is Tk.67.82 billion or 6.6 per cent lower than Tk 1025.42 billion in January 2009, the review said.
Bangladesh Bank followed tight monetary policy stance in the quarter under review compared to the previous quarter, keeping in view the rising trend in inflation as well as the presence of excess liquidity in the banking system, it said.
About agriculture, the review said during January-March period, the growth of agricultural production was lower than in the previous quarter.
The Metropolitan Chamber has forecast that the country's GDP (gross domestic product) is likely to grow nearly by the projected 6.0 per cent in the current fiscal year (FY), driven by favourable service sector growth, stable domestic financial market and signs of global recovery.
"Despite the slight under-performance of the leading sectors, it can be said that the growth momentum in Bangladesh economy continued in the January-March quarter of FY10, benefiting from the global recovery and the stability in domestic financial markets that stimulated demand for increased private sector credit," the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) said in its January-March quarterly review.
The review also said the growth was broad-based, across the export-driven manufacturing sector such as jute and woven garments, leather and -agro process, and food processing, as well as the domestic-oriented industries such as food processing, cement and pharmaceuticals.
It, however, said price pressures in the quarter under review increased, in tandem with global inflation, but average inflation remained within the target range.
"The fragility of Bangladesh economy increased in the quarter due to the huge gap between demand and supply of the basic infrastructure, the MCCI review said adding the uncertainty surrounding the energy sector problems could adversely affect business sentiments and interrupt the rebound of private investment.
The Chamber urged the government to redouble its efforts in improving the quality and management of basic infrastructure expenditures and provide energy at low cost to everyone.
"Investment in productive energy is of paramount importance in helping achieve the government's goal of establishing market-based export economy," it said.
The MCCI review revealed that the average rate of inflation (12-month annual average CPI) rose to 5.95 per cent in Q3 (February 2010) from 5.42 per cent of the previous quarter.
The rate of inflation on point-to-point basis increased to 9.06 per cent in February from 8.51 per cent in December, it said adding, "This was the highest point-to-point inflation in sixteen months."
The chamber said the decline in non-food inflation since the second quarter of the current fiscal as is indicated by BBS data defies all logic.
"It is not clear why or how, despite the perceived operation of the income effect of increased public sector salaries and the price effect of global price increase in fuels, and domestic price increases in electricity and gas, and the sharp rise in asset prices (real estate and stock exchange securities), non-food inflation did fall in the period under review," it added.
Regarding foreign exchange, the review said the exchange rate of Taka per US dollar underwent an overall depreciation of 0.18 per cent in the quarter in comparison with Q2 FY10.
"The Taka depreciated by 0. 12 per cent in January and 0.13 per cent in February but in March the Taka marginally appreciated by 0.07 per cent," it said.
At the end of the third quarter of the fiscal, foreign exchange reserve stood at $10.160 billion, an increase of $4.470 billion or 77.1 per cent increase over the reserve of $5.953 billion recorded at the end of the corresponding third quarter of FY09, it added.
The review said that the inward remittances in Q3FY10 stood at $2738 million, compared to $2529 million in the corresponding quarter of FY09 - an 8.2 per cent y-o-y increase and the commodity trade balance recorded a lower deficit of $226 million in January 2010 compared to the deficit of $465 million in January 2009.
"The over-all balance of payments showed a surplus of $57 million in January 2010, compared to a deficit of US$129 million in January 2009."
On the external front, merchandise exports in January of Q3FY10 increased year-on-year by 3.49 per cent compared to 1.0 per cent in Q2FY10, the review said.
This indicates that the global demand is gradually improving, which resulted in improving export performance especially in raw jute, jute products, leather, petroleum byproducts, bicycle, footwear, agro processed food, terry towel and ceramic products, it added.
The review, however, said while export receipts recorded a positive growth in January 2010, total export receipts during July-January 2009-10 fiscal was 4.96 per cent lower than in the corresponding seven months of the previous fiscal.
"Total import payments (CIF) in January Q3FY10 stood at $1841 million, lower by $227 million or 10.96 per cent than $2067 million in January 2009."
The 10.96 per cent contraction in import payments is in sharp contrast with the observed 9.5 per cent increase in the previous quarter, the MCCI review said.
In the third quarter, total NBR tax collection grew by 14.7 per cent compared to 10.7 per cent in the same quarter of the pervious year, the review said adding, "The development was unfavourable compared to 26.6 per cent growth in the previous quarter."
Total budget financing of the government during July-January 2010 through borrowing stood lower at Tk 34.65 billion, as against Tk 133.71 billion during the same period of the last fiscal, the review said.
'The amount of budget financing was just 11.9 per cent of the total target of Tk. 292.28 billion for the entire fiscal year (FY10)."
The disbursement rate of government spending during the quarter under review declined compared to the previous quarter, the chamber said in its review.
"Despite the government's effort to accelerate spending, implementation of various projects was hindered by administrative inefficiency," it added.
The outstanding domestic debt of the government stood at Tk. 957.60 billion in January 2010, which is Tk.67.82 billion or 6.6 per cent lower than Tk 1025.42 billion in January 2009, the review said.
Bangladesh Bank followed tight monetary policy stance in the quarter under review compared to the previous quarter, keeping in view the rising trend in inflation as well as the presence of excess liquidity in the banking system, it said.
About agriculture, the review said during January-March period, the growth of agricultural production was lower than in the previous quarter.