Bangladesh News

The GDP growth of the country will drop in FY08 due to a slowdown in the economic activities in the first half of the current fiscal year, the Asian Development Bank (ADB) said yesterday.

As per the ADB prediction, the GDP growth is expected to be below 6 percent this fiscal year compared with 6.5 percent in the previous fiscal year.

The economic holdup resulted from the erosion in business confidence, extensive flooding and cyclone Sidr, and decrease in garments exports, says a quarterly economic report of the ADB.

ADB country director Hua Du formally launched the report at a press conference, illustrating the country’s latest economic health.

The report observed that due to the government’s anti-corruption drive, many investors have become uncertain if the new system would work and be sustainable. It, however, said that the fear among the investors have started to ease.

“A turnaround in economic activity is expected in the second half of FY08 as indicated by recent recovery in exports and growth in private sector credit,” the report said.

On the rising inflation rate, the ADB said that inflationary pressures continue to heighten due to the shortfall in domestic production, aggravated by higher food prices in international markets.

“Containing high inflation is a major macroeconomic challenge when fixed income earners and the poor are particularly vulnerable to high and rising food prices,” it said.

The report also referred to the government initiative of setting up the better-business forum to facilitate systematic feedback from the private sector and other stakeholders on major issues and problems affecting private sector development.

Expenditures in the current fiscal year are likely to increase beyond the estimated expenditures in the original budget and fiscal deficit is likely to shoot to 4.7 percent of GDP in FY08 compared to 3.2 percent in the preceding year.

The ADB blamed the increase on post-flood and cyclone relief and higher import cost of food grains, fuel and fertiliser.

Hua Du told the journalists that continuous subsidy in energy sector has been cutting funds for infrastructure developments.

She favoured adjusting the prices of petroleum products in line with the international prices and at the same time asked the government to take steps so that poor people are not affected due to this.

The government can introduce a system similar to that of the elderly citizens’ allowances where poor people will receive kerosene allowances from the banks showing their cards, the ADB country director added.