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Economy under strain

CPD says economic growth may go below 6pc as political turmoil battered first half of fiscal year

Staff Correspondent
GDP growth could slide below 6 percent this fiscal year due to the lengthy spell of political turmoil in the first half which put serious strains on the economy.
"There might be some recovery but we will not be able to fully recoup the losses of the last six months," Prof Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), said yesterday at the unveiling of the think-tank's review of the macroeconomic performance in the first half offiscal 2013-14.
CPD expects the economy to grow between 5.6 percent and 5.8 percent should there be no major supply disruption and political turmoil in the next half of fiscal 2013-14.
"It is disquieting to see that GDP growth acceleration, so critical to realising Bangladesh's ambition of becoming a middle-income country and graduating from the LDC bracket, has been lost in recent years. ”
GDP grew by 6 percent in fiscal 2012-13, down
from 6.2 percent in fiscal 2011-12 and 6.7 percent in fiscal 2010-11, a record.
Rahman said it would be a "major challenge" to return to the higher growth trajectory seen.
The CPD projection, which is way below the government's target of 7.2 percent, is in line with the World Bank's 5.7 percent.
However, Finance Minister AMA Muhith last week said the growth would not be less than 6.3 percent.
Bangladesh has maintained its growth trend in areas of exports and balance of payments, while some indicators including import payments demonstrated signs of recovery, he said.
Concurrently, economic performance of a number of indicators continued to deteriorate in the first half of fiscal 2013-14 including inflation, ADP implementation, remittance inflow and foreign aid utilisation. "Any major breakthrough in the area of private investment is yet to be seen." He said the disruption in the last six months "seriously" affected the service and the retail sectors.
CPD Distinguished Fellow Debapriya Bhattacharya said the current government, however, has the leeway to take the economy back to the right track.
"The macroeconomy is enjoying stability, which may not be giving a jump to investment, but the economy is not going through any major ups or downs."
Although the income is sliding the budget deficit is "acceptable and within control", which will give the government room to increase expenditure. "But the government will have to ensure productive expenditure."
He said the excess $2 billion in the balance of payments would give the government flexibility to raise imports. "As a result, the exchange rate, the rate of interest and the inflation have, to some extent, remained stable."
Besides, the prices of food, fertiliser and fuel are stable or on the declining trend in the global market. "So, it will not be impossible for the government to utilise the opportunity and take the country forward until the next budget."
"Maybe, we will not be able to jump to 6 to 7 percent GDP growth, but it will be possible to keep the growth in the region of 5 percent."