The bank, in its latest economic update, has also projected a 5.8 per cent growth in service sector and three per cent in agriculture.

The country's gross domestic product (GDP) growth for FY2003 is estimated at 5.3 per cent compared to 4.4 per cent in the previous year due to the estimated growth in three major sectors, said the ADB in its Quarterly Economic Update.

The Update, however, said the investment climate remained weak as reflected in low levels of both domestic and foreign investment.

The Update for Bangladesh, June 2003, was released yesterday at a press briefing held at the bank's office in Dhaka. The bank's Country Director Toru Shibuichi and other high officials were present.

"Growth in industrial output during FY2003 is estimated to increase to 7.3 per cent from 6.5 per cent in FY2002 mainly due to a recovery in manufacturing production and steady growth in electricity, gas and construction activity," the Update said.

During the first eight months of FY2003, the bank said, year-on-year manufacturing output increased by 5.2 per cent compared to the corresponding period of FY2002.

Despite these improvements, the manufacturing sector continues to perform below its true potential, it observed.

"Infrastructure bottlenecks in energy, road transport and port, and weak governance limit the competitiveness of the manufacturing sector," the ADB pointed out.

Probable 5.8 per cent growth in service sector compared to 5.4 per cent in FY2002 is likely to be accounted for wholesale and retail trade, transport and communication, public administration and defense and social services, according to the Update.

Due to good harvest of aus and aman paddy and an increase in the area under boro cultivation, agriculture output for the year is likely to exceed three per cent compared with zero growth last year, it said.

The ADB Update further said revenue collection in FY 2003 is expected to grow by 12.5 per cent over the revenue intake of the previous year.

The annual development programme (ADP) increased by only 6.9 per cent against the targeted 20 per cent growth, the ADB said, adding the fiscal deficit is expected to stand at 4.2 per cent of GDP due to lower growth in revenue income and ADP during the period.

Credit growth moderated to 12.8 per cent in April 2003 from 15 per cent a year ago while broad money growth increased to 15.2 per cent in April 2003 from 13.7 per cent in April 2002, it said on the government's monetary management.

Inflation on a point to point basis increased to six per cent in March 2003 from 4.4 per cent in December 2002 as the food price index further accelerated to 6.7 per cent from 3.6 per cent during the period.

Elaborating the issue the ADB said the rural inflation has been rising faster than urban inflation. Till March 2003, rural inflation increased by 6.1 per cent as against an increase of 5.6 per cent in urban areas.

On the issue of balance of payment, the bank said the current account of the balance of payments (excluding official grants) for the first nine months of FY 2003 moved to a surplus of 555 million US dollars from a surplus of 48 million US dollars during the corresponding period of the previous year.

"Although the law and order situation has generally improved over the past year, there has been a number of incidents of law and order breakdown during recent weeks," it concluded.