WB’s new estimate shows GDP to grow by only 5.8pcStaff Correspondent
In another blow to the government projection, the World Bank on Tuesday in a new estimate said that the country’s GDP growth would decline to 5.8 per cent in the current fiscal year.
The WB earlier in October projected that Bangladesh’s growth in the current FY 2012-2013 would be around 6 per cent, much below the government projection of 7.2 per cent.
The global lender in its latest Global Economic Prospects released on Tuesday said the country’s growth would slow down to 5.8 per cent because of moderation of export due to adverse global environments.
Zahid Hossain, senior economist of the World Bank Dhaka Office, told New Age that although they had projected around 6 per cent growth in October they firmed up the projection at 5.8 per cent in the latest estimate.
He said International Monetary Fund made similar estimate of 5.8 per cent growth for Bangladesh in the current fiscal year.
Zahid said the growth slowdown would result from the weak performance of exports, slowing investment and global crisis. ‘The negative growth in capital machinery and industrial raw material has resulted from slowing export,’ he said.
The government in the budget for the current fiscal year had projected that the GDP would grow by 7.2 per cent although the growth in the last fiscal year was 6.32 per cent against the target of 7 per cent.
Bangladesh Bank recently said that the economy was likely to grow at around 6.2 per cent this fiscal year.
The Asian Development Bank in October said Bangladesh’s economic growth would decline further to 6 per cent while the local think-tank Centre for Policy Dialogue earlier this month said the growth would be between 6.3 and 6.4 per cent.
The WB report said although Bangladesh’s export performance weakened in 2012, domestic demand was supported by steady inflows of migrant remittances and a relatively stable agricultural performance.
‘External constraints have been exacerbated by supply side bottlenecks including inadequate infrastructure, and by political uncertainty,’ it said.
A further diversification of export markets and gains in market share will benefit Bangladesh, as growth is expected to pick up faster in North America and Asia compared with near-stagnant growth projected for the Euro Area in 2013.
‘Infrastructure and energy constraints could, however, slow further gains in competitiveness,’ it said.
Bangladesh’s GDP growth is forecast to rise to 6.2 per cent in the next 2013-14 fiscal year, as the global economy continues its slow path to a recovery, and pick up to 6.5 percent in 2014-15.
The WB said that in December inflation also picked in Bangladesh, but to a smaller extent reflecting recent fuel price increases as well as higher food price inflation.
It observed that the economic outlook for the South Asia region was subject to several risks.
‘A key domestic risk is that of fiscal consolidation not proceeding as planned. Although governments across the region have committed to fiscal consolidation measures, with elections coming up in several South Asian countries within the next two years, the pressures for populist spending measures could increase and cutting subsides may prove difficult.’
In terms of external risks, a protracted fiscal impasse in the United States is an immediate risk to the global economy, and in turn for South Asia’s economic outlook.
Another source of external risk for South Asia is the possibility of resurgence of Euro Area tensions during the forecast horizon.
The Euro Area accounts for the largest share of South Asia’s exports and a resumption of financial market tensions in the Euro Area would affect South Asia through trade and financial channels.
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