ADB forecasts 6.7pc GDP growth
Bangladeshs economic growth is expected to improve slightly in the current fiscal year due to strong domestic demand backed by better exports and remittances, said the Asian Development Bank (ADB) yesterday.
The bank in its latest outlook update for Asian countries published yesterday projected a slight acceleration in the GDP growth to 6.7 percent, as both exports and remittances, the two significant economic drivers, are expected to perform better in the FY16 than in FY15.
The projection, however, is slightly lower than the governments own forecast of 7 percent made in its fiscal policy for the FY16. The ADBs forecast remains higher than the World Banks pessimistic outlook of 6.3 percent for the FY16.
Strong domestic demand and exports have boosted our outlook for Bangladesh economy for 2016, said ADB Country Director for Bangladesh, Kazuhiko Higuchi, while releasing the report.
For the FY2016, GDP growth is projected to further accelerate at 6.7 percent. Both exports and remittancesthe two main growth drivers are expected to perform better than in FY2015, he said.
Domestic demand will make a significant contribution, driven mainly by strong expansion in remittances, will boost consumption and the prospects of investments picking up due to a stable business climate are brighter, he said.
Bangladeshs GDP growth in the last fiscal year was 6.5 per cent, beating ADP forecast of 6.1 per cent. The ADP report said export growth in FY16 is projected to improve to 6 per cent as economic growth in the euro-dominated areas and the US strengthens. Imports are also projected to increase by 13 percent, mainly on account of capital goods, industrial raw materials and food grains. Remittance inflow is likely to grow at 9 percent as the government steps up its efforts to place workers overseas.
Despite higher growth in remittances, the trade deficit is likely to translate into current account deficit of 5 percent of GDP in the FY16.
Higuchi said that the garments sector remains important for Bangladeshs economy. At the moment, the country is looking for new export markets and despite GSP suspension by the US, the RMG sector has further potential to grow. However, the ADB highlighted that several risks like infrastructure constraints and revenue deficit could derail the projections.
The report also emphasised the need for political stability to gain the confidence of investors and consumers and maintaining macroeconomic stability as prerequisites for achieving high economic growth.
It said the failure to achieve the revenue target without matching expenditure adjustments would create inflationary pressure as the government would be forced to borrow from banks, thereby undermining macroeconomic stability. Likewise, inadequate foreign investments would limit spending on infrastructure development that will also lead to growth curtailment.
ADBs Principal Country Specialist, Mohammed Parvez Imdad, said inflation is expected to decline to 6.2 per cent in the FY16 from 6.4 per cent in previous fiscal due to the cautious stance taken by the Bangladesh Bank on the monetary policy and better agricultural outlook.
About the GDP growth projection, he said, Continued efforts for resource mobilisation, structural reforms and infrastructure upgradation will support higher growth.
