6.5pc GDP growth projected: WB report: Pol uncertainty may hinder prospects

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SM Mizanur Rahman :Bangladesh’s economy is on a stable growth path with a positive near-term macroeconomic outlook, said a World Bank (WB) report on Bangladesh Development Update on Tuesday. It noted declining inflation, rising reserves, contained fiscal deficit and stable public debt.The WB in its report projected the Gross Domestic Product (GDP) growth in FY16 at 6.5 per cent in Bangladesh supported by relative political calm and productivity. It would be backed by stronger consumption and export growth. However, the country is poised to lose competitiveness in global market. Public sector wage increase may add 0.9 percentage point to the measured growth.Public insecurity, political uncertainty and tightening of supply side constraints can also hurt growth  prospects, it added WB report said the Trans-Pacific Partnership might pose further threat for Bangladeshi RMG products in the US in the medium-term. Macroeconomic stability expected to sustain the trend in FY16, it added. However, reducing inflation to 6.2 percent during FY16 will be challenging but achievable given a cautious 15.6 per cent broad money growth and stable international prices. External current account deficit is projected at 0.4 per cent of GDP, but reserve increase may continue.Budget deficit in FY16 is likely to increase to 4.6 percent of GDP as revenue collections fall short of the ambitious revenue targets and exceed expenditure shortfall. The update said debt is currently at a low risk.Growth momentum regained with political stability, the report said, adding FY15 GDP growth is estimated at 6.5 percent. “Bangladesh’s economy is expected to grow at 6.5 per cent in financial year 2015,” Zahid Hussain, lead economist of WB’s Dhaka office told journalists at WB office in city.It is facing a declining trend in international competitiveness coupled with external and domestic risks. However, the overall economy is expected to remain stable. Zahid Hussain said Bangladesh needs to sustain GDP and remittances growth, create jobs, contain inflation, and improve the quality of public service delivery to reduce extreme poverty and boost shared prosperity. “Policy makers should plan to tackle macro slippages such as the large current account deficit, exchange rate volatility and rising inflation,” the WB lead economist said. He said the policymaker should stem financial sector insolvency and prioritize the completion of ongoing reform initiatives. “Bangladesh’s economy is on a stable path with a positive near-term macroeconomic outlook,” Zahid Hussain said. He added the latest Bangladesh Development Update notes declining inflation, rising reserves, contained fiscal deficit and stable public debt.However, according to the report, downside risk persists for the economy regarding both domestic and external factors. International competitiveness on both demand and supply sides show a declining trend. Export growth declined to 3.4 percent. However, remittance growth recovered to 7.7 percent, the report said, adding rise in industrial growth to 9.6 percent in FY15 from 8.2 percent in FY14 propelled growth, the report said. It added though, growth in consumption dominated, the real private investment growth declined. Agriculture growth is slower and the private investment rate is stagnant.Inflation declined to 6.4 percent in FY15 from 7.3 percent in FY14, thanks to declining food inflation. The rural-urban gap in food inflation also reduced, the report said, adding but non-food inflation increased as political unrest caused supply disruptions. Aggregate demand management limited inflation volatility while declining international commodity prices helped reduce inflation.FY16 budget is more of the same as FY15, implementation remains the main challenge, the report said, adding revenue and foreign financing targets are ambitious.ADP is oversized with too many projects, the report said, adding spending on subsidy is projected to decline further.Prolonged slower growth in the advanced and emerging markets may adversely impact the garments exports and widen trade deficit. Financial sector vulnerability includes increase in non-performing loans to total loans, problematic corporate governance in banking, and restricted access to credit for doing business.

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