Vol. 5 Num 591 Thu. January 26, 2006  
Front Page

6pc GDP growth achievable: MCCI

Despite some weaknesses, the country's economy in the first half of the current fiscal year showed some positive features and achieving six per cent GDP growth would not be much difficult, observed Metropolitan Chamber of Commerce and Industry (MCCI).

The leading business platform in its quarterly economic review (October-December 2005) attributed growth in manufacturing and other industrial sub sectors to the positive sign of economy.

Terming increasing inflationary pressure and the government's borrowing from the banks as the economy's disconcerting aspects, the review suggested that the government takes effective measures for controlling inflation, solving problems of the infrastructure, particularly electricity and ports, and overcoming other weak points like tight monetary policy and increasing interest rate.

The MCCI review, referring to an internal survey, said leading entrepreneurs expressed deep concern over political tensions in the country and criticised the government for its failure in taking necessary moves to defuse the tensions.

The entrepreneurs, however, appreciated the government for recognising the threat from the fanatics and taking firm actions against them, the review report said.

The performance in the second quarter of the current fiscal year (FY) was somewhat better than the first quarter, the MCCI review observed.

Significant increase was observed in the indices of industrial production indicating a higher production than that of the last FY.

"All industrial sub-sectors, particularly manufacturing and electricity generation, experienced robust growth," the review said, adding, "If the industrial sector growth can be sustained and raised further, the much talked about six per cent GDP growth should not be difficult to achieve."

The industrial production (large and medium) is estimated to have recorded a growth of about 10 per cent against 8.2 per cent last year.

Textiles, garments, knitwear, food processing, pharmaceutical, leather, cement and plastic industries have recorded substantial growth in the first six months.

The electricity sub-sector grew by 14 per cent in September 2005.

"In spite of the uncertainties about the prospect of achieving the food production target of the year, it appears that the food grains production, both of Aus and Aman, will be higher than that of last year," it said.

The disconcerting aspect of the economy is increasing inflationary pressure and the government's borrowing from the banking sector, the review observed.

Both fiscal balance and balance of payments have become more vulnerable during the period, it said, adding that the central bank's tight monetary policy has failed to hold inflationary pressure in check.

The 7.95 per cent inflation in November 2005 was the highest in last eight years, it pointed out.

The implementation of Annual Development Programme (ADP) reportedly picked up at a high level in the last three months and reached 33 per cent of the budgeted amount in December 2005.

Meanwhile, the export increased by 12.47 per cent against import growth of 5.02 per cent during first four months of the fiscal. Local currency taka, however, lost about 4.43 per cent of its value against dollar.

The trade deficit in July-October last year was $919 million, some 15 per cent lower than $1086 million deficit in the corresponding period of 2004.

In the area of public finance, the total tax collection increased by 14.3 per cent in July-November compared to the same period in previous FY. The increase in tax collection was attributed to more contribution by supplementary duties, VAT, and income taxes.

Referring to the growth in remittance earning, the review observed that $2170 million came as remittance in the first six months which is 22 per cent higher than in the corresponding period of the last FY.

Despite bomb blasts and law and order uncertainties, the service sector showed a steady growth. Two major sub-sectors, communication and healthcare, registered the same growth as in the last year.

The foreign exchange reserve, however, declined -- standing at $2.5 billion in December 2005 compared to 3.2 billion in December 2004.