Bangladesh economy gained momentum from the beginning of the fiscal 2015-16 and appears to have laid solid foundation to meet the 7 percent growth target get set for the year though the World Bank and the Asian Development Bank forecast the country to grow at 6.7 percent in FY16. Citi, in its annual market update released on Monday said this. Mentioning that the beginning of 2015 brought tough challenges for Bangladesh economy from the political front as adverse impact of political unrest took its toll on the economy during the first quarter of 2015, the update said, the economy showed resilience and grew by 6.51 percent in FY2014-15. The service sector contributed the most at 3 percent followed by industrial sector and agricultural sector at 2.7 percent and 0.5 percent respectively. 2015 marked promising feats for Bangladesh with the achievement of Millennium Development Goals and escalation from a status from low income country to lower-middle income country as per the World Bank’s classification. With the country achieving growth in excess of 6 percent over the last 5 years, focus has now shifted towards moving to the next level and stepping up the growth rate to 8 percent by 2020 as envisaged under the country’s 7th five-year plan. The annual average inflation decreased to 6.20 percent at the end of 2015, the lowest level since February 2013, from 6.99 percent in December 2014. The point-to-point inflation hovered between 6-6.4 percent throughout the year before closing at 6.10 percent in December. Inflation remained in the proximity of government’s inflation target of 6.20 percent set for FY16. Food inflation has dipped to 5.48 percent in December 2015 from 5.86 percent in December 2014, whereas the non-food inflation jumped to 7.05 percent from 6.48 percent over the same period. The drop in food inflation is attributed to increase in rice output during the harvest season, and fall in import prices of global agricultural commodities. Non-food inflation rate increase was driven by supply disruptions during the first quarter of 2015 and upward adjustment of electricity and gas prices. In FY15, the country posted huge trade deficit, as import growth outstripped exports growth by a significant margin. During the first half of the current fiscal FY16, trade deficit was lower compared to the previous corresponding period, which however, as projected by the central bank is to rise as capital machineries imports intensify by the end of the fiscal. With remittance making up for the trade deficit, the current account posted a surplus of $1.06 billion during the first 5 months of the current fiscal compared to $1.65 billion deficit in FY15. Exports gained momentum after a slow start to FY16 rising by 7.8 percent during July-Dec 2015 to $16.1 billion and exceeding the target of $15.86 billion for the period. The growth was primarily driven by RMG sector export growth of 9.2 percent during the same period. At current pace, the country is well on its way of hitting the export target of $33.5 billion set for FY16. The government has set a target in the new export policy to escalate RMG exports to $50 billion by 2021, communications and technology exports to $1 billion by 2019, and total exports to $60 billion in 2021. To build a sustainable platform for the country’s export growth, diversification and investment expansion is crucial, suggested the City update. At present, RMG accounts for over 80 percent of the total export earnings, which is facing challenges of faltering economic recovery of the Eurozone, and is one of its major export destinations. Decisions on setting up new country specific economic zones have been applauded by the business community. Infrastructure support in the form of power, ports, and improving transport facilities through better connectivity would help to have an edge over competing nations and benefit from the rising opportunities. Import settlement during the first 5 months of FY16 has grown marginally by 2.48 percent to $16.6 billion from $16.2 billion in the corresponding period last fiscal. Global oil prices hitting record lows was one of the primary factors behind fall in fuel import payments. Import remained sluggish during July-September period, which picked up again in October onwards with rising payments for government’s mega infrastructure projects, and rising capital machineries imports amid growing confidence. The statistics showing high growth of capital machineries imports and rising import orders provides an indication of growing investments and expansion of production capacity. More than 500,000 Bangladeshi workers were able to land overseas jobs in 2015, reflecting a 30 percent growth over the previous year. A surge in the number of migrants entering Saudi Arabia, Malaysia and Kuwait has significantly contributed to the growth of overall migration. Bangladesh currently ranks the 8th among the top 10 remittance recipient nations. However, the total remittance received during the period showed a meager increase of 2.47 percent amounting to $15.31 billion. Most Bangladeshi workers are employed in Middle Eastern and Asian countries, the currencies of which have depreciated against the US dollar, whereas the Taka held strong, which resulted in workers sending home lower amount in remittance. The reopening of the Saudi Arabian markets, the Government-to Government (G2G) arrangement with Malaysia, FIFA 2022 World Cup related construction activities in Qatar and fiscal expansion in Gulf Cooperation Council countries presents opportunities for growing jobs. Government’s recent steps in setting up technical cooperation between the vocational training institutes of several countries with workforce requirement could yield positive results in the near future. Foreign Exchange Reserves of the country climbed to a record $27.45 billion at the end of 2015 marking an 18.7 percent year-on-year increase and 8.8 percent increase from the beginning of the FY16 fiscal. The growth in remittance was strong enough to offset the trade balance shortfall for FY16 so far, helping the current account to be in surplus marginally. Although the foreign direct investment inflow remained stable, the growing private sector foreign loans resulted in financial account surplus and contributed towards growing reserves of Bangladesh Bank. Furthermore, the active intervention of Bangladesh Bank through purchasing of US Dollars from the local commercial banks also added to the reserves. Bangladesh Bank withdrew its mandatory guarantee provision against any foreign loan to be taken by a local firm following the approval of the Board of Investment (BoI). As a result, foreign loans approved by the BoI will no longer require approval from Bangladesh Bank. The Public Private Partnership (PPP) Bill 2015 has been approved by the parliament with an aim to attract more foreign and private investment in infrastructure and service-oriented sector. Other key initiatives to promote investment included decisions to set up 100 new economic zones by Bangladesh Economic Zones Authority (BEZA) and approval by Bangladesh Bank to extend mortgage loans in Taka to Non-Resident Bangladeshis (NRBs) for the purpose of housing in Bangladesh. In addition, The Financial Reporting Act 2015 has been approved by parliament to ensure more transparency and accountability in financial reporting activities and a separate regulatory body Financial Reporting Council (FRC) is being formed to regulate the country’s financial reporting activities. The Cabinet has also approved ‘Foreign Exchange Regulation (Amendment) Act, 2015’, updating the existing law on regulating the purchase and selling of foreign currencies and securities, which will help the authorities track any local or foreign resident to come up with information about their foreign exchange or securities and immoveable or other properties abroad.
