7.2pc growth unlikely to be achieved: CPD
The think-tank says GDP growth may not surpass 6.32pc due to fall in investment, exportStaff Correspondent
The Centre for Policy Dialogue on Saturday observed that the government would not be able to achieve its target of 7.2 per cent GDP growth for this fiscal year mainly due to a decreased growth in investment, export and industrial production.
The gross domestic product in the current fiscal year is unlikely to surpass the growth record of the FY 2011-2012 when economy grew by 6.32 per cent, said the country’s leading independent think-tank in an analytical review of Bangladesh’s macro-economic performance in the FY 2012-2013.
The CPD observed that the country’s economy was approaching towards lower-level equilibrium in 2013.
In the review, the CPD said although the microeconomic situation was more stable in the first half of the current fiscal year compared with that in the same period of the previous fiscal year, it might face serious challenges in view of the looming uncertainties on the political front.
‘No doubt, performance of the economy in the FY 2012-2013 will critically hinge on how the political challenges facing Bangladesh at the moment are addressed in the coming months and any prolonged uncertainty in this context will have serious implications for the performance of the economy,’ it said.
It also said that the stability could come under pressure if the downside risks were not appropriately addressed through emphasis on enhancing domestic resources, stimulating private sector investment, further improvement in public investment and raising the quality of governance in economic management.
The CPD said that the gap between the growth target in the Sixth Five-Year Plan and the actual performance would further widen due to failure in achieving GDP growth target in the consecutive two years.
According to the Sixth Five-Year Plan, the government is supposed to achieve GDP growth at the rate of 7.9 per cent in the FY 2012-2013.
‘We do not see sufficient investment particularly in the private sector, growth in export, growth in import of capital machinery and credit growth to the private sector for achieving higher GDP growth,’ CPD executive director Mustafizur Rahman said at a press briefing held at its office in the city on Saturday.
He, however, said that the economy might grow at 6.3 per cent to 6.4 per cent in the fiscal year.
It appears that the government has compromised, like the previous year, the GDP growth to keep macro-economy stable and inflation in control through tightening credit growth in the private sector, he said.
The government will have to take steps to increase investment to achieve growth at higher rate particularly in the private sector which is suffering lower credit and high cost of borrowing, he said.
He stressed development of infrastructure facilities, ensuring access to finance and reform in the financial sector to attract investment including foreign direct investment.
Sufficient growth in import of capital machinery is also important for achieving higher growth, he said adding that the latest price hike of major petroleum products would also affect the growth achievement.
The CPD review projected that an additional Tk 10,000 crore might be required in the current fiscal year to meet budgetary allocation as revenue collection by the National Board of Revenue might fall short of target for the first time since 2009.
To meet the additional resource requirement, the bank borrowing by the government may be increased in the coming months, it stated.
The review said that the Bangladesh Bank might adopt another contractionary monetary policy and it would increase the prices of fuel and electricity, resulting in higher non-food inflation to hurt purchasing capacity of fixed-income group of people.
It emphasised on maintaining close coordination between the central bank and the finance ministry to limit the government borrowing from the banking sector.
The review suggested that the government should pay attention to increasing its export earnings as the earnings slowed down and fell short of target in the first five months of the current fiscal year due to recession in the US and European markets.
‘The government should focus on increasing volume of export, competitiveness and productivity instead of blaming global recession.’
In the review, the CPD observed that growth in the remittance inflow and utilisation of the foreign loans and grants remained good, budget deficit and balance of payment also in the safe zone in the period.
It also suggested that the government should review the targets set in the Sixth Five-Year plan following the failure in achieving most of the targets.
‘The Plan has become obsolete and irrelevant as most of the projection including investment, savings and administrative reforms could not be achieved during its first two years,’ CPD distinguished fellow Debapriya Bhattacharya said at the briefing.
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