& çâÌæÚUæð´ ·¤è ¥ôÚU Îð¹Ùæ ÁæÚUè ÚU¹ð´ ¥ÍæüÌ ¥ÂÙð ÜÿØ ÂÚU ŠØæÙ ÚU¹ð´Ð ãæÚU Ù ×æÙð´, €UØô´ç·¤ ·¤æ× ·¤ÚUÙð âð ¥æÂ·¤ô ©gðàØ ·¤è Âýæç# ãôÌè ãñ ¥õÚU ÁèßÙ ·¤æ ¹æÜèÂÙ ÎêÚU ãôÌæ ãñÐ ÖÜð ãè ÁèßÙ ×ð´ ç·¤ÌÙè Öè ·¤çÆÙæ§ü €UØô´ Ù ¥æ°, çÁ™ææâæ ¥õÚU ©ˆâæã ÕÙæ° ÚU¹ð´Ð ŠØæÙ ÚU¹ð´, ÜÿØ ã×ðàææ ¥æÂ·Ô¤ Âæâ ãôÌð ãñ´ çÁ‹ãð´ ÂæÙð ·Ô¤ çÜ° ÂýØæâ ¥æÂ ·¤Öè Öè àæéM¤ ·¤ÚU â·¤Ìð ãñ´Ð

Economy pays political bill, shows resilience

New WB report applauds Bangladesh's macroeconomic management

ARUN DEVNATH, from Washington, and Md Fazlur Rahman in Dhaka
Bangladesh and Afghanistan, two countries weighed down by political strains, are the only exceptions to an optimistic picture painted by the World Bank for South Asia's economic growth.
Bangladesh is set to pay the bill of political turmoil: stagnating private investment is part of the bleak picture, according to the lending agency's new report released yesterday.
It is paired with lower consumption due to decreasing remittance flows. In the first nine months of the fiscal year, inward remittances fell 5.78 percent year-on-year to $10.47 billion, data from Bangladesh Bank shows.
Ultimately, this leads to subdued service sector and industrial activity, with real GDP growth
projected to come down to 5.4 percent in the year ending June 30 from 6 percent last fiscal year, the WB said. The growth rate is higher than the average for developing countries.
The political turmoil in the last quarter of 2013 inflicted a value added loss of about $1.4 billion, with 86 percent in services, 11 percent in industry and 3 percent in agriculture, the WB said.
The crisis eroded business and consumer confidence in general as the rate of return on investment perceived by domestic and foreign investors declined. Inflation edged up 4 basis points to 7.48 percent in March on the back of an increase in food price, particularly the staplerice.
Stability in international commodity prices, weak domestic demand and some appreciation of the nominal exchange rate are combined with a restrained monetary policy to moderate the recent increase in inflation, accordingto the WB.
Economic activity recovered in the second halfof the fiscal year, driven by resilient exports and domestic demand, following setbacks suffered in the first half due to political uncertainty and turmoil, the WB said.
Foreign exchange reserves have increased to adequate levels, with a sustained large surplus in the overall balance of payments. The external current account surplus has remained comfortableduetogood export growth and weak imports, which offset the decline in workers' remittances.
During a video conference from Washington with reporters in Dhaka, Kathmandu and Islamabad, South Asia Chief Economist Martin Rama praised Bangladesh's economic growth performance
"The country has a tremendous opportunity to grow. It has relatively high performance in terms of economic growth compared to other countries in the region."
Getting out of low private investment should be a priority for the government to spur economic growth, he added.
The region's largest economy, India, would see growth rise to 5.7 percent this fiscal year from 4.8 percent last fiscal year with activity receiving a boost from a more competitive exchange rate and many large investment projects going ahead, the WB forecasts.
Pakistan's economic growth could increase to 4 percent this fiscal year from 3.6 percent in fiscal 2012-13 as its economy benefited from a reduction in electricity blackouts, resilient remittance flows from Pakistani workers abroad, rebounding manufacturing exports and a more buoyant services sector.
Nepal was recovering from a difficult year affected by setbacks in the agricultural sector and with its government budget. Helped by strong remittance flows boosting
consumption and the services sector, the economy should grow by 4.5 percent in fiscal 2013-14 after 3.6 percent in fiscal 2012-13.
Sri Lanka would continue to grow at 7.3 percent this year as the economy was sustained by new capacity from infrastructure investments and rebuilding after the country's recent conflict
The economy in Afghanistan will be weighed down by the persistent uncertainty caused by the withdrawal this year of international forces and the subsequent reduction in foreign aid forthe economy, the WB said.
In addition, Afghanistan's agricultural output has declined, prompting the WB to cut economic growth outlook to 3.2 percent this year after 3.6 percent in 2013.
The WB was "cautiously optimistic" about economic prospects in South Asia in 2014 "because of growing exports and investment as it emphasised that the risks to growth were becoming more domestic, including an increasingly vulnerable banking sector."
1 n its twice-a-year report known as South Asia Economic Focus, the WB forecast that economic growth in South Asia in line with the overall outlook on developing countries is projected to gradually strengthen.
As higher import demand and economic growth in developed countries is expected to outweigh adverse effects from potentially lower capital inflows, regional real GDP growth in South Asia is expected to gradually increase from 4.8 percent in 2013 to 5.2 percent in 2014, accordingto the report.
"The main pillars of this growth projection are a solid pick up in gross fixed investment as well as continued solid export growth."
South Asian countries appeared to have largely recovered from last year's financial turmoil caused by changes in US Federal Reserve monetary policy. Many were rebuilding currency reserves while curbing current account deficits.
" But these successes on the external side were accompanied by looming problems in the domestic economy. Economic growth could be held back by unstable banking sectors, inflation, fiscal deficits and debt, and persistent shortfalls in energy and transport infrastructure
across the reg on," the WB said.
"Now that external pressures are waning it's time to refocus on addressing problems within the economies in South Asia so that countries can boost growth and reduce poverty," said Rama in Washington.
"The good news is that across South Asia, there is a growing momentum in support of reforms to increase growth because governments recognise this is the best way to overcome poverty."
Zahid Hussain, lead economist at World Bank's office in Dhaka, said investment is still going through uncertainty.
"The current political stability needs to be persistent for the next two to three years to lure investment. At the same time, it can't be said that the political uncertainty is completely over."
He also said Bangladesh's exports went up - despite image crisis because of recent disasters in the garment sector - due to the country's delivery capacity - a level can't be seen in its close competitors.
"Bangladesh will have to resolve its image crisis in the garment sector as fast as possible, as its competitors areseriously workingto expand their capacity level."
In its report, the WB also said the financial sector in South Asia is stressed. "A rise in default risk across the board due to losses inflicted by a prolonged disruption in production and trade has worsened the state of the b anking sector."
"The state-owned banks were already negatively impacted by the earlier financial scams. The growing nonperforming loans of private commercial banks are also a matter ofconcem."
The report advised South Asian nations to focus on the banking sector because it is central to the region’s economic stability and growth.
"We’ve studied banks in India, Nepal, and Pakistan because they are fairly representative of the situation of banks across the region as a whole," said South Asia Region Economist Markus Kitzmuller.
"Policy makers need to take these vulnerabilities seriously because a problem in the banking sector can easily put pressure on already constrained government budgets and