DHAKA: Bangladesh economic activities recovered in the second half of FY14, driven by resilient exports and domestic demand, following setbacks suffered in the first half due to political uncertainty and turmoil.
A recovery in export growth and increases in public expenditure are likely to help achieve 5.4% GDP growth in FY14 lower than last year’s 6% which was expected to 7.2 percent in the budget.
This was disclosed by the World Bank across the globe at a time on April 9.
World Bank lead economist Jahid Hossain disclosed the report at capital’s Agargaon on Wednesday.
The report said political turmoil in the last quarter of 2013 inflicted a value-added loss of about $1.4 billion, of which 86% was in services, 11% in industry and the remaining 3% in agriculture.
Sound macroeconomic management helped contain inflation at a moderate single-digit level. Inflation has increased in recent months due to cost push from supply disruptions and wage increases. Stability in international commodity prices, weak domestic demand, and some appreciation of the nominal exchange rate combined with a restrained monetary policy to moderate the recent increase in inflation.
Foreign exchange reserves have increased to adequate levels, with a sustained large surplus in the overall balance of payments. The external current account surplus has remained comfortable due to good export growth and weak imports, which offset the decline in workers’ remittances, added WB report.
The financial sector is stressed. A rise in default risk across the board due to losses inflicted by a prolonged disruption in production and trade has worsened the state of the banking sector. The state-owned banks were already negatively impacted by the earlier financial scams. The growing nonperforming loans of private commercial banks are also a matter of concern.
It also said prudent macroeconomic management continues. Monetary policy pursued a restrained path, achieving broadly the targets for the first half of FY14. Implementation of monetary policy benefited from slowdown in private credit growth, contributing to an increase in excess liquidity.
The fiscal deficit and public borrowing have remained within sustainable limits. Fiscal management this year is facing challenges because of a large and growing shortfall in NBR tax revenue, demand for fiscal support from sectors adversely affected by the political turmoil and slower utilization of ADP.
Tax revenue growth in the first seven months of FY14 was barely 10 percent. Government bank borrowing so far has been contained, while net nonbank borrowing has increased.
BDST: 1315 HRS, APR 09, 2014
