Citi NA has stressed the need for enhancing the quality of workforce and addressing the skill gap to help align the supply side factors with prudent fiscal measures.
"To achieve sustainable growth and investment, it is imperative to reap the benefits of the favourable demographic characteristics of a large working population. Enhancing the quality of the workforce and addressing the skill gap will help align the supply side factors with supportive fiscal measures," Citi NA said in its latest update on Bangladesh economy.
Given the importance of private investment growth in achieving the target, the government has planned on speeding up public investment on infrastructure through its fast track projects. BDT 18.73 billion has been allocated for eight fast-track mega projects (Padma bridge, Metro rail, Rooppur nuclear power plant, Rampal power plant, Paira sea port, Matarbari power plant, Padma bridge rail link and Dohazari-Cox's Bazar-Gundum rail line.) in the budget for FY 17, which is directed at providing the necessary infrastructure for the private investment to flourish.
It said Bangladesh has managed to set growth on a higher trajectory, posting GDP growth of 7.05% in FY 2015-16 on the back of surge in both private and public investment as well as increase in consumption expenditures. Higher implementation of Annual Development Program (ADP) and higher consumption driven by new pay scale for public sector employees and moderate inflation helped in boosting the GDP growth. Manufacturing sector grew the most by 10.1% followed by service sector and agriculture, which grew by 6.7% and 2.6% respectively in the past fiscal.
GDP growth target for FY 2016-17 has been set at 7.20%, while the target is to achieve 8% by 2020 as per the government's 7th Five Year Plan. To support the growth, Investment-GDP ratio of 34.40% has been aimed for the same period from the existing level of 29.38%.
To support the GDP growth target of 7.20%, Bangladesh Bank has announced a pro-growth monetary policy statement (MPS) for July-December 2016 setting private sector credit growth target of 16.50% for FY 17 up from 14.80% target set for FY 16 in the previous MPS. Following the recent upsurge in private sector credit, a highly expansionary fiscal policy and spike in oil prices in the global market, prudent macroeconomic management is warranted to contain inflation within 5.80% target set for FY 17 in the national budget and monetary policy.
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