Economy continues facing medium-term risks
Says ADB quarterly update on Bangladesh
Star Business Report
Bangladesh economy continues facing a number of medium-term risks including longer-term impact of the MFA phaseout on garment industry, a possible increase in hartal especially in the run-up to the next general elections and weak governance, said the Asian Development Bank (ADB)."Several policy initiatives and infrastructure developments are needed to face the challenges of the termination of multi-fibre arrangement (MFA)," the bank said in its latest Quarterly Economic Update Bangladesh in March issue released yesterday. External demand remains buoyant, as the immediate fears of a post-MFA withdrawal scenario on textiles exports begin to recede. External risks do remain-- a sharp increase in US interest rates and higher petroleum prices could have adverse knock-on effects for Bangladesh, it added. The current revenue collection has fallen short of target. There is an urgent need to increase revenue-GDP ratio. This is essential for increasing public investment needed for propelling the economy on a higher growth path for achieving the millennium development goals (MDGs), it added. Inflation continues to remain on a rising trend mainly due to higher domestic food prices and increase in fuel prices. On a point-to-point basis, inflation increased to 6.7 percent in March 2005 with increasing trends in both food and non-food prices, the bank said. The fiscal and current account deficits are expected to be moderate despite considerable pressures, the bank noted. The economy in the FY2005 is expected to grow at 5.3 percent, slightly lower than 5.5 percent in the preceding year, mainly due to the adverse impact of the July-September, 2004 floods, it said observing economic performance remains solid despite severe floods and external shocks. There is a clear sign of steady increase in private investment as indicated by the surge in credit, particularly to industry and agriculture sectors, an increase in imports of capital goods, and most heartening, an upsurge in foreign direct investment (FDI) inflows. Largely driven by export-oriented manufacturing, the overall growth in industrial production during FY2005 is estimated at 7.8 percent, higher than 7.7 percent in the previous year. Industrial production has maintained its upward trend, primarily due to steady growth in export-oriented manufacturing. Output of the large and medium scale manufacturing rose by 6.7 percent in the first half of FY2005, compared with the first half of the preceding year. The services sector is likely to show broad-based expansion in FY2005 with a growth of 6 percent, from 5.7 percent in the preceding year.
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