WB drastically lowers GDP growth projection
Thursday, 27 November 2008
FE Report
The World Bank (WB) Wednesday drastically lowered the Bangladesh's economic growth projection for the current financial year, between 4.8 per cent and 5.4 per cent, due to the global financial meltdown impact.
Finance and Planning Adviser Mirza Azizul Islam, however, summarily dismissed the WB projection terming it "gross underestimation".
"The global financial crisis is likely to affect Bangladesh's exports and remittance in the near future, pushing down its GDP growth down to 5.4 per cent net from the existing projection of 6.5 per cent," lead economist in the World Bank's Dhaka office, Vinaya Swaroop, said at a workshop on 'Global financial crisis and its impact on Bangladesh'.
Depending on the severity of the global economic crisis, the country's GDP growth could even fall to 4.8 per cent, he noted.
"It's a gross under-estimation," said Finance and planning adviser Mirza Azizul Islam while giving his reaction to the World Bank GDP projection.
Dr. Aziz claimed that the country's economic growth would not drop below six per cent in the current fiscal year.
"The country's GDP is expected to grow more than six per cent," he said emerging from a review meeting on the state-owned commercial banks (SCBs).
"Under no circumstance the growth could fall below 6.0 per cent in the current fiscal year." he added.
The country's GDP growth was projected at 6.5 per cent initially, but the central bank, later, lowered it at 6.2 per cent considering the effect of global financial crisis.
The WB, however, suggested that the next elected government would have to adopt a prudent policy for helping the country cope with the emerging global financial meltdown.
"It will be a great challenge for the next elected government to face the emerging global financial shock," said the WB economist.
Speaking at the workshop, the WB Country Director Xian Zhu observed that although no major adverse impact of the global financial crisis on Bangladesh economy had yet been reported, the situation might turn bad within the next couple of months.
He also expressed the fear that a significant number of Bangladeshis could lose their overseas jobs in the near future because of the global financial crisis, which would ultimately affect the country's remittance growth.
Swaroop suggested the government and civil society should remain watchful and be prepared with a contingency plan, including government assistance, while it is extremely important to ensure that the newly elected government has the relevant briefing and be able to quickly move and take appropriate policy actions.
Replying to a question, he suggested prudent steps to send workers abroad as much as possible against the target of 800,000 people for the current fiscal year.
He said the World Bank is still against the idea of devaluation of Taka as suggested by the private sector.
World Bank country director Xian Zhu recommended implementation of ADP and large infrastructure projects to manage the impact of the crisis.
The Washington -based multilateral agency forecast two scenarios with the GDP growing at 4.8 per cent in case of the worst effects of the global recession. In case of moderate effects, the GDP might grow at 5.4 per cent.
Dr Aziz said the macro-economic indicators like export and import, inflow of remittance, and internal revenue mobilisation are in a favourable position.
"Even the inflation rate has dropped to single digit in the last month after it stayed at double digit level in the previous three months," he added.
Quoting a recent projection of International Monetary Fund (IMF) on the country's growth Dr Aziz said he cannot accept the WB's low growth projection.
An IMF mission reviewed the country's macro-economy and projected 5.5 per cent growth, said Dr Aziz.
The IMF had projected 5.5 per cent growth in the last fiscal year due to economic slowdown following anti-corruption drive and crop losses to floods and cyclone.
But the country's GDP grew at 6.2 per cent in 2007-08, thanks to 15 per cent export growth, 30 per cent growth in remittance and good Boro harvest.
On performance review of the country's three SCBs the finance and planning adviser said they have improved in various indicators excepting the operational costs during July-September period.
The operational costs of Sonali Bank Limited, Janata Bank Limited and Agrani Bank Limited have surpassed their targets although non-performing loans, credit disbursement and loan recovery have shown improvement.
The operational costs increased due to 20 per cent dearness allowance given to the officials and employees and festivals bonuses, he said.
The SCBs have been given targets by the finance ministry on various indicators after they were turned into public limited companies early this year.
The first review meeting on SCBs was held June last.
The World Bank (WB) Wednesday drastically lowered the Bangladesh's economic growth projection for the current financial year, between 4.8 per cent and 5.4 per cent, due to the global financial meltdown impact.
Finance and Planning Adviser Mirza Azizul Islam, however, summarily dismissed the WB projection terming it "gross underestimation".
"The global financial crisis is likely to affect Bangladesh's exports and remittance in the near future, pushing down its GDP growth down to 5.4 per cent net from the existing projection of 6.5 per cent," lead economist in the World Bank's Dhaka office, Vinaya Swaroop, said at a workshop on 'Global financial crisis and its impact on Bangladesh'.
Depending on the severity of the global economic crisis, the country's GDP growth could even fall to 4.8 per cent, he noted.
"It's a gross under-estimation," said Finance and planning adviser Mirza Azizul Islam while giving his reaction to the World Bank GDP projection.
Dr. Aziz claimed that the country's economic growth would not drop below six per cent in the current fiscal year.
"The country's GDP is expected to grow more than six per cent," he said emerging from a review meeting on the state-owned commercial banks (SCBs).
"Under no circumstance the growth could fall below 6.0 per cent in the current fiscal year." he added.
The country's GDP growth was projected at 6.5 per cent initially, but the central bank, later, lowered it at 6.2 per cent considering the effect of global financial crisis.
The WB, however, suggested that the next elected government would have to adopt a prudent policy for helping the country cope with the emerging global financial meltdown.
"It will be a great challenge for the next elected government to face the emerging global financial shock," said the WB economist.
Speaking at the workshop, the WB Country Director Xian Zhu observed that although no major adverse impact of the global financial crisis on Bangladesh economy had yet been reported, the situation might turn bad within the next couple of months.
He also expressed the fear that a significant number of Bangladeshis could lose their overseas jobs in the near future because of the global financial crisis, which would ultimately affect the country's remittance growth.
Swaroop suggested the government and civil society should remain watchful and be prepared with a contingency plan, including government assistance, while it is extremely important to ensure that the newly elected government has the relevant briefing and be able to quickly move and take appropriate policy actions.
Replying to a question, he suggested prudent steps to send workers abroad as much as possible against the target of 800,000 people for the current fiscal year.
He said the World Bank is still against the idea of devaluation of Taka as suggested by the private sector.
World Bank country director Xian Zhu recommended implementation of ADP and large infrastructure projects to manage the impact of the crisis.
The Washington -based multilateral agency forecast two scenarios with the GDP growing at 4.8 per cent in case of the worst effects of the global recession. In case of moderate effects, the GDP might grow at 5.4 per cent.
Dr Aziz said the macro-economic indicators like export and import, inflow of remittance, and internal revenue mobilisation are in a favourable position.
"Even the inflation rate has dropped to single digit in the last month after it stayed at double digit level in the previous three months," he added.
Quoting a recent projection of International Monetary Fund (IMF) on the country's growth Dr Aziz said he cannot accept the WB's low growth projection.
An IMF mission reviewed the country's macro-economy and projected 5.5 per cent growth, said Dr Aziz.
The IMF had projected 5.5 per cent growth in the last fiscal year due to economic slowdown following anti-corruption drive and crop losses to floods and cyclone.
But the country's GDP grew at 6.2 per cent in 2007-08, thanks to 15 per cent export growth, 30 per cent growth in remittance and good Boro harvest.
On performance review of the country's three SCBs the finance and planning adviser said they have improved in various indicators excepting the operational costs during July-September period.
The operational costs of Sonali Bank Limited, Janata Bank Limited and Agrani Bank Limited have surpassed their targets although non-performing loans, credit disbursement and loan recovery have shown improvement.
The operational costs increased due to 20 per cent dearness allowance given to the officials and employees and festivals bonuses, he said.
The SCBs have been given targets by the finance ministry on various indicators after they were turned into public limited companies early this year.
The first review meeting on SCBs was held June last.