Vol. 5 Num 757 Fri. July 14, 2006  

BB forecasts 6.5-6.8pc GDP growth in FY07
Second MPS targets curb in inflation

Bangladesh Bank has projected a GDP range between 6.5 and 6.8 percent in the current fiscal year expecting a growth momentum in sustaining or strengthening further in industry and services.

The projection was made in its second Monetary Policy Statement (MPS) that was released yesterday.

While briefing journalists BB Governor Salehuddin Ahmed said a 6.71 percent growth recorded in the last fiscal despite country's political unrest and high oil prices.

He said the ensuing election would not affect this higher growth.

The central bank aims to control inflation with continuing a tight monetary policy.

But economic observers have expressed their doubt over curbing in inflation saying a further rise in lending rate is likely.

The MPS said monetary policies pursued by the BB are aimed at maintaining price stability while supporting the highest sustainable growth of domestic output.

It said although the growth would gain momentum, agriculture sector growth may ease down.

The BB governor admitted that an extra pressure on lending rate would be created. He, however, said if the banks can manage the funds professionally, the rate will not increase further.

Allah Malik Kazemi, deputy governor of BB, also spoke at the briefing, He said with the stance of the central bank the exchange rate will remain stable.

The BB in last December released the MPS for the first time and targeted control in inflation.

But, as per the statistics up to May of the last fiscal year, credit flow in both the public and private sectors increased. The inflation and lending rate also increased during the period.

Average lending rate reached 11.60 percent in March, 06 against that of December 2005. According to sources, lending rate shot up further in June.

Point-to-point inflation stood 7.61 percent in May against 7.07 percent in December. On an average, inflation went up to 7.14 per cent in May from 7.05 per cent in December 2005.

The BB in its MPS said recent pressures on consumer prices are emerging mainly through the external trade channels. Growing exports of daily consumer necessities such as vegetables and fishes are steadily pulling their domestic prices towards the higher export prices.

"Depreciation of taka associated with balance of payment pressure from rising import prices has also to some extent added to the upward trend in consumer prices," the statement said.

The statement further said manipulations by major market players and extortions in the supply chains also need to be addressed.

"For stable progress, mutually supportive well- coordinated monetary and fiscal policies are needed for sectoral structural reforms to proceed on a steady course, avoiding knee jerk response," the MPS pointed out.