ADB forecasts 7pc GDP growth this fiscal
The Asian Development Bank (ADB) said Wednesday the Bangladesh economy is projected to grow at the rate of 7.0 per cent in the current fiscal year (FY), 2011-12, because of continued export growth and expansionary domestic demand due to increased remittance inflow and higher income.
The Manila-based anti-poverty lender has raised its gross domestic product (GDP) growth forecast rate for Bangladesh to 7.0 per cent from the previous 6.7 per cent, projected in Asian Development Outlook (ADO) in April 2011.
The ADB Dhaka office Wednesday released the ADO 2011 update in presence of its Country Director Thevakumar Kandiah, senior country specialist Mohammad Zahid Hossain and other officials.
"GDP growth in the FY 2012 is projected at the rate of 7.0 per cent, higher than the ADO 2011 forecast of 6.7 per cent. Strong export growth is seen, though volume growth will be lower than the previous year (as the cyclical rebound will no longer be felt)," said Zahid Hossain.
The expected expansion in domestic demand stems from the growth-oriented economic policies, rising income and pick-up in remittances, he said at a briefing on the occasion of realising the ADO 2011 update.
The ADB, however, cautioned the government about the inflationary pressure and four other challenges for achieving the projected higher economic growth in the current fiscal.
"The monetary policy stance may be compromised to meet the higher growth target, or the attempted tightening may not control inflation or contain import demand," said Mr Hossain.
He said: "The expected revenue and external financing may not be mobilised as planned, failure to boost power generation could hold back industrial expansion, political instability could affect economic activities, and natural disasters remain a perennial risk."
The ADB's update projected an 8.5 per cent inflation rate on an average in the current FY, which is one percentage point higher than the government's 7.5 per cent projection in the national budget.
The ADB's country specialist said: "To keep inflation within the rate projected in this update, the central bank would need to bring down annual money and credit growth to, at least, 18.5 per cent and 20 per cent respectively."
When asked about the government's stance on achieving higher GDP growth amid upward inflationary pressure in the current fiscal, Mr Hossain said keeping balance between the two macro-economic variables is the major job of the government.
"It's really an art for a government. Time-bound measures in the monetary and fiscal policies for balancing the two things are very imperative. Both the issues will have to be managed by the government simultaneously," he said.
The ADB senior country specialist said as Bangladesh is maintaining a buoyant domestic demand growth, the supply-side management by the government is very essential to keep the inflation under control as well as to maintain the higher economic growth.
The ADO update 2011 said industrial growth is seen edging up to 8.8 per cent in the FY 2012, as exports perform well, and smaller and agro-based industries, alongside housing and constriction, expand.
Growth in agriculture is likely to decrease to 4.6 per cent from 5.0 per cent because of the higher base in the successive years, but expansion in cultivation of higher quality seeds and a better performance in livestock, poultry and fisheries will support the still-high growth, it said.
The service sector is expected to do well with 6.8 per cent growth, in line with industries' acceleration and pick-up in trade and transport activities and telecom services, the outlook forecasted.
"The import bill is expected to rise by 20 per cent in the FY 2012, reflecting the effects of the tighter monetary policy and the expected stability in prices of raw materials, including those related to export industries."
The growth of export receipts is projected at the rate of 15 per cent, close to the historical average, the ADO update said.
About the remittance inflow, the outlook said it is expected to grow by 12 per cent in the FY 12, but as in recent years, it will be unable to offset the expected trade, services and income account deficits.
"The current account is expected to move to a modest deficit of 0.3 per cent of GDP in this fiscal, from a 0.9 per cent surplus in the previous year," the outlook noted.
ADB Country Director Thevakumar Kandiah said the government needs to focus on building large infrastructures, energy upgradation, human resources development and reining in inflation to keep its upward economic growth and cut poverty.
On Asia, the ADB development outlook has projected a downward 7.5 per cent average economic growth in the FY 2012, instead of its earlier projection of 7.7 per cent, published in the last outlook of April 2011.
"Growth in South Asia is also slowing down this year, as monetary authorities move to combat the still high level of inflation. GDP is expected to expand at the rate of 7.2 per cent with the inflation forecast marked up to 9.1 per cent," the ADB outlook update said.
The Asian Development Bank (ADB) said Wednesday the Bangladesh economy is projected to grow at the rate of 7.0 per cent in the current fiscal year (FY), 2011-12, because of continued export growth and expansionary domestic demand due to increased remittance inflow and higher income.
The Manila-based anti-poverty lender has raised its gross domestic product (GDP) growth forecast rate for Bangladesh to 7.0 per cent from the previous 6.7 per cent, projected in Asian Development Outlook (ADO) in April 2011.
The ADB Dhaka office Wednesday released the ADO 2011 update in presence of its Country Director Thevakumar Kandiah, senior country specialist Mohammad Zahid Hossain and other officials.
"GDP growth in the FY 2012 is projected at the rate of 7.0 per cent, higher than the ADO 2011 forecast of 6.7 per cent. Strong export growth is seen, though volume growth will be lower than the previous year (as the cyclical rebound will no longer be felt)," said Zahid Hossain.
The expected expansion in domestic demand stems from the growth-oriented economic policies, rising income and pick-up in remittances, he said at a briefing on the occasion of realising the ADO 2011 update.
The ADB, however, cautioned the government about the inflationary pressure and four other challenges for achieving the projected higher economic growth in the current fiscal.
"The monetary policy stance may be compromised to meet the higher growth target, or the attempted tightening may not control inflation or contain import demand," said Mr Hossain.
He said: "The expected revenue and external financing may not be mobilised as planned, failure to boost power generation could hold back industrial expansion, political instability could affect economic activities, and natural disasters remain a perennial risk."
The ADB's update projected an 8.5 per cent inflation rate on an average in the current FY, which is one percentage point higher than the government's 7.5 per cent projection in the national budget.
The ADB's country specialist said: "To keep inflation within the rate projected in this update, the central bank would need to bring down annual money and credit growth to, at least, 18.5 per cent and 20 per cent respectively."
When asked about the government's stance on achieving higher GDP growth amid upward inflationary pressure in the current fiscal, Mr Hossain said keeping balance between the two macro-economic variables is the major job of the government.
"It's really an art for a government. Time-bound measures in the monetary and fiscal policies for balancing the two things are very imperative. Both the issues will have to be managed by the government simultaneously," he said.
The ADB senior country specialist said as Bangladesh is maintaining a buoyant domestic demand growth, the supply-side management by the government is very essential to keep the inflation under control as well as to maintain the higher economic growth.
The ADO update 2011 said industrial growth is seen edging up to 8.8 per cent in the FY 2012, as exports perform well, and smaller and agro-based industries, alongside housing and constriction, expand.
Growth in agriculture is likely to decrease to 4.6 per cent from 5.0 per cent because of the higher base in the successive years, but expansion in cultivation of higher quality seeds and a better performance in livestock, poultry and fisheries will support the still-high growth, it said.
The service sector is expected to do well with 6.8 per cent growth, in line with industries' acceleration and pick-up in trade and transport activities and telecom services, the outlook forecasted.
"The import bill is expected to rise by 20 per cent in the FY 2012, reflecting the effects of the tighter monetary policy and the expected stability in prices of raw materials, including those related to export industries."
The growth of export receipts is projected at the rate of 15 per cent, close to the historical average, the ADO update said.
About the remittance inflow, the outlook said it is expected to grow by 12 per cent in the FY 12, but as in recent years, it will be unable to offset the expected trade, services and income account deficits.
"The current account is expected to move to a modest deficit of 0.3 per cent of GDP in this fiscal, from a 0.9 per cent surplus in the previous year," the outlook noted.
ADB Country Director Thevakumar Kandiah said the government needs to focus on building large infrastructures, energy upgradation, human resources development and reining in inflation to keep its upward economic growth and cut poverty.
On Asia, the ADB development outlook has projected a downward 7.5 per cent average economic growth in the FY 2012, instead of its earlier projection of 7.7 per cent, published in the last outlook of April 2011.
"Growth in South Asia is also slowing down this year, as monetary authorities move to combat the still high level of inflation. GDP is expected to expand at the rate of 7.2 per cent with the inflation forecast marked up to 9.1 per cent," the ADB outlook update said.