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Good harvest, exports keep economy growing

Says World Bank in quarterly update

Star Report
With a4.1-perccnt rise in food grains production, the country very likely will achieve the projected 5.5-percent GDP growth in the current fiscal year, says the World Bank in its quarterlyupdate.
The country's economy has continued to grow in fiscal year (FY) 2003-04, thanks to early grain har-
vests estimated at 25.3 million tonnes in net production, it reports.
A strong growth in exports and imports too is seen to boost the trade service sector. Die rebound in Bangladesh's export performance, which started in February 2003, has continued, Ure bank says, adding export earnings during the first seven montlis of FYO-1 has increased by 16.2 percent compared to the
corresponding period of the previous year.
"The remittances from expatriate Bangladeshis have rebounded in recent months, increasing by 11.2 percent in the fist eight months of the airrent fiscal year relative to the corresponding period of the previous year." the World Bank (WB) updates.
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Quoting Dhaka Chamber of Commerce and Industry and Bangladesh Bank sources, the WB says local entrepreneurs are investing in some emerging sectors like pharmaceuticals, textiles, iodised salt and mobile phone. Construction activities also have remained strong, as partly reflected in the rise in demand for construction materials including cement and iron rod.
The bank infers, "Both households and firms may have benefited from a strong 13.5 percent increase in credit during the 12 months ending in January 2004."
The WB, however, observes that despite a fiscal stimulus built into the budget for this year, its implementation so far has not made any visible, significant boost to the aggregate demand.
Only 36 per cent of the Annual Development Programme (ADP) has been utilised during the first eight months of the current FY, the bank says. "The slow pace of development spending is primarily due to weak implementation capacity and poor disbursement of the foreign aid component," it explains.
About 42 percent of the development works from local resources was carried out during the period, compared with only 30-percent utilisation of project aid from development partners, it adds.
The WB says the budget deficit for the first half of the year is estimated at 0.8 percent of the GDP (gross domestic product), compared with the 4.8-percent
target for the whole year. So, it expects the FY04 budget deficit to be short of the target, but higher than the 3.5-percent deficit achieved last year.
The revenue collection grew by 11.5 percent during the first seven months of FY04 against the 15 percent targeted for the whole year.
On inflation at the national level, the WB report says consumer prices in November 2003 reached a five-year high of 6.7 percent relative to November 2002, the bank says, adding inflation increased by 7 percent in urban areas and 6.6 percent in rural areas.
"Much of the recent increase in inflation appear to have been due to increases in international prices of food items, which surged since July 2003, and the lagged effects of increases in administered prices -- even though the government has not raised gas and petroleum prices in line with the formulae agreed under the bank's Development Support Credit 1."
On the monetary front, the WB says the central bank has begun to mop up excess liquidity as a precaution against further acceleration in inflation.