Economic Reporter :
After projecting lower growth rate, the World Bank (WB) has said curbing the central bank’s autonomy poses risk to the economy.
“Reform reversals such as easing of loan classification standards, ceilings on lending rates and reduced autonomy of Bangladesh Bank (BB) pose additional risks,” the bank said in its development update unveiled on Thursday at its Dhaka office.
The global lender said the escalating trade tensions in major economies, vulnerable financial sector governance, weak government revenues, exchange rate appreciation, and slower export growth may hold back the country’s higher growth.
The bank forecasts a 7.2 per cent growth rate for the current fiscal, lower than what the government aims to achieve.
The government has targeted an 8.2 per cent gross domestic product (GDP) growth for fiscal year 2019-20.
“Escalating trade tensions in major economies may continue to weigh on confidence and investment while reducing trade flows,” the report said. “Policy uncertainty from a no-deal Brexit also poses risks of trade disruption and economic contraction,” it added.
The report warned of an uncertain global outlook and domestic risks in the financial sector.
In his presentation, Mr Haven said the real effective exchange rate (REER) appreciation is a challenge for Bangladesh as its trade competitiveness and export diversification could be affected.
He said higher inflation remains a risk in the context of growing domestic demand and higher public expenditure.
The bank projected a higher inflation rate at 5.9 per cent in the current fiscal, although the government has set a target to keep it within the 5.6 per cent band.
Mr Bernard said, “In the financial sector, high non-performing loans and stock market volatility remain risks.”
“Weak governance in the banking sector could impair its capacity to extend credit and support growth if the economy slows down,” he added.
The report cautioned that liquidity pressures may be exacerbated by additional government borrowing from domestic banks and a further deterioration in the financial health of state banks could undermine the fiscal balance.
After projecting lower growth rate, the World Bank (WB) has said curbing the central bank’s autonomy poses risk to the economy.
“Reform reversals such as easing of loan classification standards, ceilings on lending rates and reduced autonomy of Bangladesh Bank (BB) pose additional risks,” the bank said in its development update unveiled on Thursday at its Dhaka office.
The global lender said the escalating trade tensions in major economies, vulnerable financial sector governance, weak government revenues, exchange rate appreciation, and slower export growth may hold back the country’s higher growth.
The bank forecasts a 7.2 per cent growth rate for the current fiscal, lower than what the government aims to achieve.
The government has targeted an 8.2 per cent gross domestic product (GDP) growth for fiscal year 2019-20.
“Escalating trade tensions in major economies may continue to weigh on confidence and investment while reducing trade flows,” the report said. “Policy uncertainty from a no-deal Brexit also poses risks of trade disruption and economic contraction,” it added.
The report warned of an uncertain global outlook and domestic risks in the financial sector.
In his presentation, Mr Haven said the real effective exchange rate (REER) appreciation is a challenge for Bangladesh as its trade competitiveness and export diversification could be affected.
He said higher inflation remains a risk in the context of growing domestic demand and higher public expenditure.
The bank projected a higher inflation rate at 5.9 per cent in the current fiscal, although the government has set a target to keep it within the 5.6 per cent band.
Mr Bernard said, “In the financial sector, high non-performing loans and stock market volatility remain risks.”
“Weak governance in the banking sector could impair its capacity to extend credit and support growth if the economy slows down,” he added.
The report cautioned that liquidity pressures may be exacerbated by additional government borrowing from domestic banks and a further deterioration in the financial health of state banks could undermine the fiscal balance.
