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Download PDF The economy slowed down in the first quarter of the current fiscal year (FY) and will not rebound unless the government ensures adequate agricultural inputs, and a conducive business and investment environment, says the central bank.
In its quarterly report to be released soon, Bangladesh Bank (BB) states the economy’s growth momentum ’somewhat slowed down’ during the first quarter largely due to losses in the agriculture and manufacturing sectors.
The report also said economic growth faces a number of risks, including socio-political instability, natural disasters, fallout from phase-out of textile export restriction on China, and rising oil prices.
Although the BB forecasts the economy would bounce back in the ‘near-term’, it notes the government must “ensure timely supply of adequate fertiliser, quality seeds and other agricultural inputs, provide agricultural credit, and marketing support.”
It went on, “Similarly, the growth of industry and services sectors would depend on sustaining conducive business and investment environment.”
The report admits that economic momentum has lost pace due to a ‘lagged effect’ of years of the central bank’s tight monetary policy.
“The growth in the agriculture sector suffered due to several factors including recurrent floods, disruption in the distribution network of fertiliser, high price of diesel, shortages of electricity, and inadequate availability of quality seeds,” it explains.
The BB says agriculture output target for FY08 is optimistic and “requires significant extra efforts in increasing food grains production, especially during the boro season and the remaining period of FY08.”
Manufacturing sector productivity fell by one percent in the first quarter of FY08 compared to that in the first quarter of FY07 due to high oil prices and power shortages.
According to the BB estimates that take FY 2000-2001 as the base year, manufacturing sector had grown by 3.2 percent in the first quarter of FY07.
But Bangladesh Bureau of Statistics (BBS) figures, with 1989-1990 as the base year, show manufacturing sector growth slowed down by .5 percentage point.
The BB figures show manufacturing grew by 1.6 percent in the first quarter of FY08 compared to 2.1 percent in the first quarter of FY07.
The central bank’s preliminary estimates show that growth of jute, cotton, ready-made garments (RMGs) and leather sub-sectors fell by 2.8 percent in the first quarter of FY08 compared to that in the first quarter of FY07.
This contributed to 5.4 percent fall in export earnings in FY08 first quarter, due to negative growth in women’s garments, handicrafts, knitwear, leather and RMG-related exports to US and European markets.
The BB report however says production of chemical, petroleum and rubber products grew by 5.4 percent, while food, beverage and tobacco production rose by 2.6 percent in the first quarter.
In the remaining three quarters of FY08, the economy will rebound due to disbursement of agricultural and industrial credit, import of raw materials and intermediate goods, and a rise in labour remittances, the central bank forecasts.
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