Trackback URL
Download PDF The country’s economic prospects will depend on the caretaker government’s success in maintaining political stability and broad public support until the elections are held, said Asian Development Bank (ADB) yesterday.
“Any material setback on the political front would undermine business confidence and negatively affect investment and growth,” said the bank’s Asian Development Outlook-2007 Update, released here yesterday.
The ADB outlook said the government’s recent administrative measures to rein in inflation have created uncertainty in the business environment rather than checking it.
Bangladesh faces various risks that could derail economic projections. Political uncertainty is the key of those risks, said the outlook.
In the updated forecast for FY2007, ADB said the GDP growth will reach 6.5 percent and inflation rate will stand at 7 percent in the current fiscal.
Bangladesh faces various risks that could derail the earlier projections on some selected economic indicators including economic growth, inflation, and current account balance.
Growth in gross domestic products (GDP), inflation, and the current account surplus of FY2007, which ended on June 30, came close to the projections made in March this year. For FY2008, the update slightly revises the earlier projection on GDP growth, but foresees higher inflation and a slightly wider current account surplus.
The caretaker government appointed in January 2007 has enjoyed widespread public support for its anti-corruption campaign as well as for its efforts to strengthen the electoral process, and advances made in previously stalled economic reforms, the updated outlook said.
The government has indicated its commitment to completing electoral reforms by the end of 2008. Nevertheless, political uncertainty will prevail until new elections are held, which are slated for the end of 2008 also, the bank said.
Any country facing an election period is always on economic risk and here Bangladesh remains on that challenge, said Hua Du, country director of ADB, at a news conference yesterday after formally releasing the outlook at the bank’s resident office in the capital.
She said, “It is very clear that the government’s anti-corruption drive will build a foundation that will certainly help to foster Bangladesh’s economic growth in the long run. But it could be a major challenge to ensure that during the transition period the national economy will not be affected.”
The update raises the inflation projection for FY2008 to 7 percent from the earlier projection of 6 percent because of heightened pressures in the second half of FY2007.
It said the government’s recent administrative measures to counter inflation, such as investigations of certain businesses suspected of hoarding supplies, measures to regulate stock levels and prices, as well as its encouragement to new importers to enter the market for inducing greater competition, appear to have had no discernible impact on inflation.
“They have, rather, created uncertainty in the business environment, contributing to price pressures,” the outlook said.
The update went on saying the Bangladesh Bank (BB) has taken a cautious monetary policy to rein in the inflation.
“But maintaining a cautious monetary policy stance will be a challenge since the recent flooding occurred at a time of high monetary expansion and rising inflation,” it added.
The ADB country director however appreciated the central bank’s prudent monetary policy, and said it is very unfortunate that the central bank had to face internal and external pressures in recent times to follow contraction monetary policy.
The GDP growth is forecast at 6.5 percent for FY2008, lowered slightly from the ADO 2007 projection because of the recent floods, which fortunately have been less severe than those in recent years.
Despite the floods, agriculture is expected to show a growth of 2.8 percent, slightly less than last year’s, it said.
Meanwhile, other developing Asian economies will register solid economic growth in 2007, driven by fast growth in the People’s Republic of China (PRC) and India, according to the outlook.
The PRC and India, which together account for 55.3 percent of the total gross domestic product (GDP) in developing Asia, recorded their fastest growth in 13 years in the first half of 2007, and in 18 years in fiscal year 2006 respectively.
Growth in Asia is now more broad-based as other regions like South Asia and Central Asia continue to post robust growth, while growth is accelerating in other economies, such as Indonesia and the Philippines.
The report, however, warns that the economic outlook for 2008 is hazy as uncertainty reigns in global financial markets and worries about the health of the US economy are mounting.
The ADO Update foresees a growth of 8.3 percent in 2007 in Asia and the Pacific, up from an earlier estimate of 7.6 percent. Provided that the global economy steadies, a growth of 8.2 percent is anticipated in 2008.
South Asia, which continues to consolidate on its progress of recent years, is expected to grow at 8.1 percent in 2007. Potential growth rates in Bangladesh, India, and Pakistan now appear to be on a more stable trajectory. The ADO Update projects India’s economy to expand by 8.5percent in 2007 and 2008.
The flagship economic report also said while inflationary pressures emerged in some parts of the region in 2007, prospects for inflation in 2008 are difficult to predict as uncertainty shrouds the global economy. If growth turns out to be slower than anticipated, inflation could come down more quickly, it added.
Comments are not moderated and only expresses personal views of visitors. BangladeshNews.com.bd is not responsible for commets posted by visitors.
Leave a Reply