Growth rate to rise further

FE Team | Published: January 01, 2015 00:00:00 | Updated: January 01, 2015 15:42:40

FE Report
Country's gross domestic product (GDP) is expected to rise further to 6.3 per cent in FY 15, Standard Chartered Global Economic Research Views Thursday said.
According to Bangladesh Bureau of Statistics (BBS), the GDP growth for FY 14 was 6.1 per cent.
"We expect growth to pick-up further to 6.3 per cent in FY15. The improvement is likely to be driven by an export growth recovery in H2-FY15, increased consumer spending driven by higher wages and lower inflation, and higher infrastructure spending as the government seeks to boost development spending," Standard Chartered Global Economic Research Views released on the last day of the outgoing year said.
It said Bangladesh is in restructuring and recovery mode after a difficult 2013-14. Heavy supply-side disruptions in the run-up to January elections and safety-related incidents in the apparel industry weighed on economic activity in FY14.
The global banking behemoth said major infrastructure projects are gaining traction. On the Padma bridge project, contracts for bridge construction and river navigability have been awarded. Work on the four-lane of the Dhaka-Chittagong highway -- a critical project to ease transport-related trade costs -- has reportedly resumed. Construction of an offshore LNG terminal is underway.
"We expect the finalisation of government contracts for construction of the Sonadia deep-sea port and an onshore LNG terminal in the coming months. Given severe deficiencies in Bangladesh's current infrastructure, improvements could provide significant impetus to growth," the London-based global bank said.
Ongoing restructuring in the apparel sector has weighed on export growth. Inspections and upgrades of factory safety standards have likely led to a temporary shift of some orders to other apparel-exporting nations. This, along with the lagged impact of lower apparel orders in the run-up to the January 2014 elections, has led to a slowdown in export growth -- which slowed to only 1.0 per cent y/y in Q1-FY15.
"This impact is likely to continue for a few more months, with a rebound expected in H2-FY15. Indeed, we have already seen a pick-up in export growth in the November data," the StanChart review said.
Bangladesh's apparel industry is fundamentally cost competitive, and several major international retailers remain positive on manufacturing in the country. Given slowing export growth and resilient imports, the trade deficit has widened since the start of FY15. Remittance growth has improved since the elections, but not as strongly as we had expected. Further government efforts to increase manpower exports and remittance inflows are needed to ensure a sustainable outlook for the current account surplus.
"We expect the surplus to narrow in FY15, which is likely to put depreciation pressure on the Bangladeshi taka (BDT) in 2015," the StanChart said.
Inflation has moderated substantially, to 6.2 per cent y/y in November from 7.5 per cent average in H2-FY14. The fall has been driven entirely by food inflation, which has eased to 6.4 per cent y/y from 9.0 per cent y/y during the same period.
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