GDP growth rate may reach 6.3pc: ADB
Wednesday, 29 September 2010
FE Report
The country's GDP growth rate in the current fiscal might reach 6.3 per cent, propelled by a strong domestic demand, Asian Development Bank (ADB) said in a report.
However, the government expects the GDP (gross domestic product) to grow at 6.7 per cent.
The report said strong domestic demand, supported by the availability of credit for productive purposes and continued fiscal stimulus, will buttress the modest expansion.
The ADB's Development Outlook 2010 Update said robust industry performance of 7.5 per cent growth is the main factor seen supporting overall GDP growth in the current fiscal year.
Inability to reduce power and gas supply shortages as planed will constrain growth, ADB outlook said.
The outlook said the country's current account surplus is estimated to fall sharply to 0.2 per cent of GDP.
The Bangladesh Resident Mission Tuesday launched the Asian Development Outlook 2010 Update, a flagship annual economic publication of the ADB. This publication is simultaneously launched Tuesday throughout the Asia Pacific region.
The budget deficit is projected to widen to 5.0 per cent in current fiscal year, from 4.5 per cent.
"Given the government's estimate of available non-bank financing sources, the bulk of the domestic financing increase will need to come from the banking system, potentially limiting private sector access to credit," the ADB report added.
It, however, said private credit growth will decline from 21.1 per cent to 16.0 per cent.
Slower growth of 8.0 per cent in workers remittances is foreseen because of the continued decline in the outflow of migrant workers, the report said adding: "Nevertheless, remittance receipts will offset the modestly larger trade deficit."
The report said the average inflation projection for fiscal year 2010-11 at 7.5 per cent.
It said demand side pressures from higher public expenditure and the lagged effects of strong money supply growth will sustain inflation at close to previous year's level.
The export is expected to grow by 8.0 per cent, largely in response to the moderate expansion in global demand.
"A waning recovery in the US and EU would likely result in weaker retail sales and lower demand for Bangladesh's export," it added.
The report said imports are forecast to grow by 11 per cent in 2010-11, reflecting a rise in domestic demand for imported raw materials and capital investment.
It said power from India should be available by end-2012 following a landmark agreement that was signed with India in August last year.
Agriculture growth is expected to be 4.1 per cent, slightly slower than the previous year.
The report said higher industrial growth, alongside some revival of trade, is expected to support expansion in services slightly to 6.7 per cent.
It also said MPS (marginal propensity to save) will slow from 18.8 in 2010 to 15.2 per cent in the current fiscal year.
It also said political instability or natural disaster would also undermine the forecast expansion.
ADB Country Director Thevakumar Kandiah, a Malaysian, spoke on the occasion while senior country specialist Zahid Hossain made a detailed presentation.
Acknowledging that Bangladesh has a very good prospect in achieving higher growth Zahid Hossain said it needs to address infrastructure constraints. "Ensuring power, gas and transport facility is a very important factor for raising productivity,"
Answering a question he said achieving 8 to 9 percent growth would not be very difficult for Bangladesh. "Bangladesh has tremendous opportunities … But, investment needs to be enhanced as it is an important factor for growth."
Replying to another question Zahid hoped that political instability will not jeopardize the growth. "Political stability is pre-requisite for growth in any country as well as a pre-requisite for economic activity."
He also said: strengthening domestic consumption and raising investment are also important for the same purposes."
Replying to another question on slower growth export growth, he said Bangladesh should diversify its export basket.
Addressing at the launching programme, ADB Bangladesh Chief Thevakumar Kandiah said the late unfolding of the effects of the global crisis affected export and remittances in 2010 with growth for both decreasing sharply.
"A pickup in domestic demand neutralised the impact of the slower export and remittances growth," he added.
He also said the country's macroeconomic management needs to remain prudent saying: Inflationary development needs to be carefully monitiored as commodity prices in the international market are showing rising trends and there is also considerable excess liquidity in the banks."
The country's GDP growth rate in the current fiscal might reach 6.3 per cent, propelled by a strong domestic demand, Asian Development Bank (ADB) said in a report.
However, the government expects the GDP (gross domestic product) to grow at 6.7 per cent.
The report said strong domestic demand, supported by the availability of credit for productive purposes and continued fiscal stimulus, will buttress the modest expansion.
The ADB's Development Outlook 2010 Update said robust industry performance of 7.5 per cent growth is the main factor seen supporting overall GDP growth in the current fiscal year.
Inability to reduce power and gas supply shortages as planed will constrain growth, ADB outlook said.
The outlook said the country's current account surplus is estimated to fall sharply to 0.2 per cent of GDP.
The Bangladesh Resident Mission Tuesday launched the Asian Development Outlook 2010 Update, a flagship annual economic publication of the ADB. This publication is simultaneously launched Tuesday throughout the Asia Pacific region.
The budget deficit is projected to widen to 5.0 per cent in current fiscal year, from 4.5 per cent.
"Given the government's estimate of available non-bank financing sources, the bulk of the domestic financing increase will need to come from the banking system, potentially limiting private sector access to credit," the ADB report added.
It, however, said private credit growth will decline from 21.1 per cent to 16.0 per cent.
Slower growth of 8.0 per cent in workers remittances is foreseen because of the continued decline in the outflow of migrant workers, the report said adding: "Nevertheless, remittance receipts will offset the modestly larger trade deficit."
The report said the average inflation projection for fiscal year 2010-11 at 7.5 per cent.
It said demand side pressures from higher public expenditure and the lagged effects of strong money supply growth will sustain inflation at close to previous year's level.
The export is expected to grow by 8.0 per cent, largely in response to the moderate expansion in global demand.
"A waning recovery in the US and EU would likely result in weaker retail sales and lower demand for Bangladesh's export," it added.
The report said imports are forecast to grow by 11 per cent in 2010-11, reflecting a rise in domestic demand for imported raw materials and capital investment.
It said power from India should be available by end-2012 following a landmark agreement that was signed with India in August last year.
Agriculture growth is expected to be 4.1 per cent, slightly slower than the previous year.
The report said higher industrial growth, alongside some revival of trade, is expected to support expansion in services slightly to 6.7 per cent.
It also said MPS (marginal propensity to save) will slow from 18.8 in 2010 to 15.2 per cent in the current fiscal year.
It also said political instability or natural disaster would also undermine the forecast expansion.
ADB Country Director Thevakumar Kandiah, a Malaysian, spoke on the occasion while senior country specialist Zahid Hossain made a detailed presentation.
Acknowledging that Bangladesh has a very good prospect in achieving higher growth Zahid Hossain said it needs to address infrastructure constraints. "Ensuring power, gas and transport facility is a very important factor for raising productivity,"
Answering a question he said achieving 8 to 9 percent growth would not be very difficult for Bangladesh. "Bangladesh has tremendous opportunities … But, investment needs to be enhanced as it is an important factor for growth."
Replying to another question Zahid hoped that political instability will not jeopardize the growth. "Political stability is pre-requisite for growth in any country as well as a pre-requisite for economic activity."
He also said: strengthening domestic consumption and raising investment are also important for the same purposes."
Replying to another question on slower growth export growth, he said Bangladesh should diversify its export basket.
Addressing at the launching programme, ADB Bangladesh Chief Thevakumar Kandiah said the late unfolding of the effects of the global crisis affected export and remittances in 2010 with growth for both decreasing sharply.
"A pickup in domestic demand neutralised the impact of the slower export and remittances growth," he added.
He also said the country's macroeconomic management needs to remain prudent saying: Inflationary development needs to be carefully monitiored as commodity prices in the international market are showing rising trends and there is also considerable excess liquidity in the banks."