Bangladesh economic growth in the current fiscal year hinges on some factors, including boosting investment and durable political stability, says Citibank NA Bangladesh. In its economic update on Bangladesh released yesterday, the Citibank said the government has set 7% GDP growth target for FY16, the attainment of which hinges on the increase in the investment to GDP ratio by another 2-2.5 percentage points from its current level of 26%. The measures from the government to boost investment through developing economic zones and ports, bringing in necessary policy and regulation changes and recent announcement to merge the Privatisation Commission and the Board of Investment are all steps in this direction, the analysis said. However, it said, ensuring durable political stability, trade liberalisation and efficient implementation of energy and communication infrastructure investments remain the preconditions for Bangladesh’s accelerated, inclusive, and sustainable growth. On the target of containing inflation within 6.2% in the current fiscal, the Citi said domestic production of rice and prices of fuel in the international market will be key determinants of whether the inflation target can be achieved. “Furthermore, the new pay-scale for government workers, which is expected to be announced in the coming months, may also put upward pressure on prices,” it said. Moderate prices of essential items in the domestic market and lower international oil prices helped in reducing the inflation rate considerably in FY 15. The country’s 12-month average inflation came down to 6.4% in FY15 from 7.35% in FY 14, thus beating the inflation target. The analysis said trade deficit in 11 months of the past financial year widened to $9.46bn from $6.18bn in the same period of the previous fiscal as import payments far exceeded export receipts. In the previous fiscal, the trade deficit was $7bn. About exports that rose 3.35% year-on-year to $31.2bn in FY15 from $30.19bn in FY14, the analysis said exports have been riding on the slow lane for majority of FY15 period as the exports of garments, which make up for the lion’s share of Bangladesh export earnings showed limited growth. Exporters also faced added difficulties in Euro zone, which accounts for close to 60% of the country’s export earnings, as EU growth remained sluggish and Euro depreciated by over 20% against the Bangladesh Taka, hurting price competitiveness. For the fiscal year of FY16, the Export Promotion Bureau has set a target of $33.5bn in exports. “To achieve the export target for the upcoming years, the primary challenge lies in export diversification strategy both geographically and in terms of concentration. Steps are necessary to enhance regional trade with South Asian and ASEAN countries,” said Citi. “Moreover, the export basket needs to be broadened where the pharmaceutical industry and software exports have the potential to take up the baton from the garment industry.” It said the payment of import bills for fuel shrank due to slump in price in the international market. “As per the central bank reports, the capital machinery and raw materials made up most of the rise in imports, which also implies that investments are on the rise and an expansion of production capacity in the near term.”
