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Economic Growth Likely to Improve in FY'11

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Economic growth likely to improve in FY'11: ADB
FE Report

The Asian Development Bank (ADB) has said Bangladesh's economic growth is expected to improve in FY2011, if the trend of export growth observed so far can be sustained.

The country could grow at a higher rate, if the pressing infrastructure constraints in the power and energy, ports, and urban services sub-sectors are urgently removed and measures for enhancing labour productivity adopted," said the ADB quarterly economic update, released Thursday.

Economic reforms, especially reforms in the trade regime, revenue mobilisation, and government development spending, and reduction of the cost of doing business, are essential for higher economic growth.

The Manila-based lender also said despite impacts of the global economic recession, Bangladesh attained reasonably a high 5.8 per cent GDP growth in FY2010, slightly higher than 5.7 per cent in FY2009.

"Although the late unfolding of the effects of the global crisis negatively affected Bangladesh's exports and remittances in FY2010, a pickup in domestic demand neutralised the impact," the donor said.

The ADB's economic update during July-September '10 said the better than expected growth was made possible by a boost in consumption, stimulated by credit expansion to the private sector and a rise in public sector wages.

In addition, robust growth in the agriculture sector along with satisfactory growth in the services sector more than compensated for the lower industry sector growth, the economic update said.

"Bangladesh needs to increase current investment to at least 30 per cent of GDP to attain the significantly higher economic growth needed to reduce the country's massive poverty," the ADB said.

The country's current investment-GDP ratio shows a stagnating trend with an average of 24.5 per cent since FY2005. The investment-GDP ratio rose by 0.6 percentage points to 25 per cent in FY2010 from 24.4 per cent in FY2009.

The Manila-based lender said stagnation in investment stems from shortages of power, energy, and other infrastructure facilities; poor investment climate reflected in the higher cost of doing business; underperformance of complementary public investment because of slow implementation of the annual development program (ADP) and weak governance.

"These factors impinge on the efficiency and profitability of domestic and foreign investment. Underperformance in public investment is caused by the lengthy and inefficient project approval process and lack of implementation capacity of the concerned ministries," it said.

The government has made progress in developing a regulatory framework for investment through public-private partnerships (PPP), the ADB said stressing on the need for operationalisation of the PPP office and start implementation of a few flagship projects.

After moderating at the beginning of FY2011 from the rising trend observed in the previous year, year-on-year inflation has been rising again, reaching 7.6 per cent in September 2010 up from 4.6 per cent in September 2009.

"The steady growth in money supply over the past years appears to be the key contributing factor for the rising inflationary trends," the report said adding "The steady rise in inflation is a concern."

In addition, the effects of natural calamities on crop production in large producing countries created volatility in food stocks in the international market, leading to supply disruptions and pushing up prices, the ADB said.

Agriculture sector grew by 4.7 per cent in FY2010 up from 4.1 per cent in FY2009. "Favorable weather conditions along with broad-based government support are the major contributing factors," ADB said.

Industry sector growth was 6.0 per cent in FY2010 down from 6.5% per cent in FY2009. Growth in manufacturing was lower at 5.7 per cent compared with 6.7 per cent in FY2009.

In the first half of FY2010, lower industry sector growth, particularly related to exports, and compression of domestic demand due to slowdown in remittance inflows affected services sector growth, especially transport and financial services, the ADB said.

"However, several compensating factors such as higher agriculture growth, pick up in imports and continued expansion of telecommunications, health and education services aided satisfactory services sector growth," the report said.

Growth in services sector slightly rose to 6.4 per cent in FY2010 from 6.3 per cent in FY2009.

The lender said Bangladesh's tax-GDP ratio (9.3% in FY2010) is still one of the lowest among South Asian and other developing countries despite improved revenue collection in recent years.

The strong revenue performance is attributed to expansion of domestic economic activities, broadening of the tax base, better compliance aided by tax reforms and publicity campaign, and commitment of the NBR officials, the quarterly report said.

Trade deficit widened to $1.3 billion during July-September of 2010, up from $739 million during the year earlier period because of the higher growth in imports compared with the growth in exports, it said.

The bullish trend in major stock market indicators continues during FY2011. The index rose 129.2 per cent year-on-year in October 2010, reaching 7,710.8 points, because of the significant involvement of institutional participants and retail investors in daily transactions, the report said.

The combined capital and financial accounts recorded a deficit of $646 million against the surplus of $258 million during the year earlier period because of the large outflows on account of trade credit.

Consequently, the overall balance of payments turned into a deficit ($426 million) in July-September of 2010, sharply lower than the surplus of $1.3 billion during the corresponding period of 2009, the report said.
 
The ADB report above details about many aspects of the present and future economic activities in and prospects of Bangladesh. This report is based on reality and not on overdreaming of 12% fantasy growth or $1 trillion GDP in 2040 that some would like to believe.
 
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The ADB report above details about many aspects of the present and future economic activities in and prospects of Bangladesh. This report is based on reality and not on overdreaming of 12% fantasy growth or $1 trillion GDP in 2040 that some would like to believe.

Hello sir.... Did you read any of my previous post... There I clearly showed that to you with 7.5% average GDP growth Bangladesh will have 1 trillion dollar economy by 2030not 2040... Under ppp... There is no doubt about that.... Just do the calculation by yourself...

N DCCI made the projection for certain GDP growth... For 7, 8, 10 and 12 percent..... Under nominal GDP growth....according to them 8 percent will be a moderate growth, 10 percent is most likely and 12 percent is highly ambitious but attainable... Up to 2030 If Bangladesh government can check the power crisis, improve the infrastructure.... And do the necessary reforms... They said very clearly there will be some big challenges but it is attainable.... Do your calculation to measure the GDP with average 7.5 percent GDP growth in terms of ppp up to 2030 and let me know what the GDP comes from present value of 260 billion... I remind you again it's 2030 not 2040..
 

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