Near-term economic outlook remains positive, says BB
FE Report | Friday, 8 August 2008
The country's near-term economic outlook remains positive, but it faces several downside risks like power shortage that might make economic management challenging in the near future, the Bangladesh Bank (BB) said Thursday.
"The authorities concerned should respond timely to face the challenges to avoid adverse impact on the economy," Chief Economist of the BB Mustafa K Mujeri told reporters while releasing the Bangladesh Bank quarterly for April-June 2008.
"Output and productivity growth in the economy has been suffering from continuing power shortage, other infrastructure bottlenecks and socio-political events," the BB said in its quarterly, released on the day.
Satisfactory growth in productivity is crucial to sustaining the positive near-term economic outlook, the quarterly said, adding that it would be important to strengthen the infrastructure and other support services and ensure congenial business climate in the coming months.
Socio-political stability will be restored following the general election in December 2008 and confidence among concerned stakeholders will be built regarding continuity of key economic polices in the post election period, Mr Mujeri added.
The near term policy thrust requires sustenance of recent turn around of economic activities and strengthened support to lead the economy to higher growth for achieving the targeted growth, the BB said.
For fiscal 2008-09 (FY09), the gross domestic product (GDP) growth has been set at 6.5 per cent.
"The upward growth trend of real sectors will have to continue for curbing inflationary pressures on the overall economy," the central bank chief economist said, adding that coordination will be needed between growth and inflation to improve the macro-economic situation with a view to alleviating poverty.
In order to contain demand pressure needed for anchoring inflation expectations, the central bank will closely monitor the monetary aggregates like reserve money (RM), broad money (M2), and credit growth and will take corrective measures if necessary.
"The inflationary pressure on economy will be eased further and the central bank will take whatever measures needed to keep it at a tolerable level," Mr. Mujeri added.
After the upward trend in the first three quarters, consumer price index (CPI) inflation started to decline in Q4 FY08, the quarterly said, adding that the inflationary pressure would probably remain under control as a result of growth supportive monetary policy stance of the central bank and production oriented policies by the government.
"We're on right track in addressing the CPI pressure on the economy," the BB chief economist said.
The policy rates - repurchase agreement (repo), reverse repo and government approved securities -- would also be reviewed in order to anchor inflation expectations, the quarterly noted.
In the present situation, softening of the inflationary pressure would require higher growth and increased production of essential food and other items in the face of tight and unstable world market for these commodities, the BB said.
"It would be important for near-term policies to correctly align the exchange rate and trade related policies to domestic realities in the short run coupled with the long run policy of increasing domestic production as the most effective strategy to fight inflation," it added.
About the food market situation, the quarterly said it would be important to put emphasis within the near term policy agenda on ensuring a good Aman harvest in the coming season along with rapid expansion of small and medium enterprises (SMEs) and non-farm activities.
"The authorities concerned should respond timely to face the challenges to avoid adverse impact on the economy," Chief Economist of the BB Mustafa K Mujeri told reporters while releasing the Bangladesh Bank quarterly for April-June 2008.
"Output and productivity growth in the economy has been suffering from continuing power shortage, other infrastructure bottlenecks and socio-political events," the BB said in its quarterly, released on the day.
Satisfactory growth in productivity is crucial to sustaining the positive near-term economic outlook, the quarterly said, adding that it would be important to strengthen the infrastructure and other support services and ensure congenial business climate in the coming months.
Socio-political stability will be restored following the general election in December 2008 and confidence among concerned stakeholders will be built regarding continuity of key economic polices in the post election period, Mr Mujeri added.
The near term policy thrust requires sustenance of recent turn around of economic activities and strengthened support to lead the economy to higher growth for achieving the targeted growth, the BB said.
For fiscal 2008-09 (FY09), the gross domestic product (GDP) growth has been set at 6.5 per cent.
"The upward growth trend of real sectors will have to continue for curbing inflationary pressures on the overall economy," the central bank chief economist said, adding that coordination will be needed between growth and inflation to improve the macro-economic situation with a view to alleviating poverty.
In order to contain demand pressure needed for anchoring inflation expectations, the central bank will closely monitor the monetary aggregates like reserve money (RM), broad money (M2), and credit growth and will take corrective measures if necessary.
"The inflationary pressure on economy will be eased further and the central bank will take whatever measures needed to keep it at a tolerable level," Mr. Mujeri added.
After the upward trend in the first three quarters, consumer price index (CPI) inflation started to decline in Q4 FY08, the quarterly said, adding that the inflationary pressure would probably remain under control as a result of growth supportive monetary policy stance of the central bank and production oriented policies by the government.
"We're on right track in addressing the CPI pressure on the economy," the BB chief economist said.
The policy rates - repurchase agreement (repo), reverse repo and government approved securities -- would also be reviewed in order to anchor inflation expectations, the quarterly noted.
In the present situation, softening of the inflationary pressure would require higher growth and increased production of essential food and other items in the face of tight and unstable world market for these commodities, the BB said.
"It would be important for near-term policies to correctly align the exchange rate and trade related policies to domestic realities in the short run coupled with the long run policy of increasing domestic production as the most effective strategy to fight inflation," it added.
About the food market situation, the quarterly said it would be important to put emphasis within the near term policy agenda on ensuring a good Aman harvest in the coming season along with rapid expansion of small and medium enterprises (SMEs) and non-farm activities.