At the current pace of growth, Bangladesh will become a middle-income country by 2023, Xian Zhu further said.

He was speaking at the monthly luncheon meeting of American Chamber of Commerce in Bangladesh (AmCham) in Dhaka.

"Bangladesh will need to employ its labour and capital much more productively and increase the investment rate by more than 5 percentage point relying on higher domestic savings," Zhu said referring to a WB analysis on how Bangladesh can raise its growth performance.

Achieving a 7.5 percent growth per year could be challenging but not impossible, Zhu said. "GDP growth in China has averaged over 9 percent since 1975, while Korea and Thailand each attained 8 percent growth for two decades and India is now close to joining this group of high growth performance."

On the recent growth performance of Bangladesh, he said resilience of its economy was demonstrated once again in fiscal year 2006-07, a year in which the country is going through a very difficult period of political transitions.

On the projected growth, the WB country director said Bangladesh appears to be achieving over 6.5 percent GDP growth in FY07 compared with 6.7 percent in FY06 and 6 percent in FY05. "This is a creditable performance by any standard and particularly considering the internal disturbances the economy had to weather in the first half of FY07.

He identified three challenges--diversification of export basket; improvement in investment climate by improving power supply, port operations and regulations; and access to long-term finance-- for achieving the growth projection.

"Bangladesh's export basket is becoming less, rather than more, diversified," he said, stressing export diversification as one of the two specific challenges to raise the country's growth performance to make it a middle-income country by 2016.

Inflation remains high around 7 percent as against an average of less than 4 percent over FY 01-05. The main underlying cause is rising food price, Zhu said.

"Food price inflation increased from 1.4 percent in FY01 to 7.8 percent in FY06 and reached 8.5 percent in March 2007," the WB official said. Rising domestic demand and cost push from increased international prices, and 'pass through effects' of administered oil prices, all appear to be at play here.

Appreciating various efforts of the present government, he said it deserves credit for achieving dramatic improvements in the functioning of Chittagong port in recent months. He also praised its initiatives for improving governance.

WB ASSISTANCE

Phase IV of the WB's Development Support Credit (DSC-IV) worth $ 200 million is scheduled to be placed to the WB Board for approval on May 29,

Zhu said.

The budget support is coming following three DSCs of $ 700 million the WB provided Bangladesh seeing the reforms implemented during the last five years, he mentioned.

"We'll continue to explore ways to support better the infrastructure (power sector, ports, railways, roads) and agriculture sectors as well as administrative reforms, including decentralisation."

Zhu said the concessionary loan would however depend on performances in economic reforms and project implementation.

AmCham President Andrew L Fawthrop welcomed the guest while outgoing US Ambassador in Dhaka Patricia A Butenis made the closing remarks appreciating the contributions of American business to Bangladesh economy.