First News
Volume:7, Number:34
First News ad
First News completed 350 issues and seven years of publication on July 2. We thank our readers, contributors, patrons and well-wishers for their continued support
Business & Finance 1
THIS WEEK

Growth in 2017

| Afsana Khan |

Fiscal weaknesses, a poor financial system, and a rise in domestic security threats could pose downside risks to Bangladesh's economic growth trajectory over the medium term

BMI Research, an associate organization of the UKbased Fitch group, projected 7.7 percent GDP growth for Bangladesh in the ongoing fiscal year (FY) 2016-17. In its recently published “Country Risk Report”, the organization mentioned that poor financial system and a rise in domestic security threats could pose downside risks for Bangladesh's economic growth trajectory over the medium term. The organization also placed Bangladesh one step down in its short-term political indicator due to the violence committed by the Islamist groups, anti-social activities, and ongoing political instability in the country.

BMI Research prepares the country risk reports of almost 200 countries and sells them to multinational companies, as well as the local companies of various countries. The information of these reports help the companies to take decisions about increasing or decreasing investment as well as other business ventures in a particular country. In its half-yearly report “Global Economic Prospects”, published on January 10, the World Bank has projected 6.8 percent GDP growth for Bangladesh during the running fiscal year. However, finance minister AMA Muhith, commerce minister Tofail Ahmed and planning minister AHM Mustafa Kamal said that the growth would rise up to 7.5 percent. The government has set a 7.2 percent growth target for 2016- 17 fiscal year in the national budget. According to Bangladesh Bureau of Statistics (BBS), the country’s GDP growth rate in the previous year was 7.1 percent.

As per the BMI Research report, the size of the country’s GDP is going to increase from USD219 billion in FY 2015-2016 to USD246 billion in FY 2016-2017. The executive summary of the BMI report says, "We expect Bangladesh's real GDP growth to remain steady at 7.1 percent in both FY2015/16 and FY2016/17. Resilience in foreign currency earnings and strong government initiatives to develop supporting infrastructure are contributing factors to this GDP growth. However, fiscal weaknesses, a poor financial system, and a rise in domestic security threats could pose downside risks to Bangladesh's economic growth trajectory over the medium term.”

In July last year, the Central Bank decided to leave its benchmark interest rates unchanged. However, it Growth in 2017 Fiscal weaknesses, a poor financial system, and a rise in domestic security threats could pose downside risks to Bangladesh's economic growth trajectory over the medium term might back down from that decision at its upcoming meeting in January due to rising core inflationary pressures and elevated credit growth, the report predicted. “A relatively stable political backdrop and consistency in foreign currency earnings have decreased the pressure from Bangladesh Bank to change its policy rate. We believe that Bangladesh Bank will continue to lax in certain sectors to increase direct investment in the priority sectors of the economy,” the report said. BMI also predicted the value of Bangladesh taka to fall against dollar in the New Year. “In 2016, the interbank exchange rate for dollar increased from BDT78.55 to BDT79.65. Although Bangladesh Bank is currently under pressure to decrease the value of taka due to the downfall in remittance flow, it has an adequate reserve of foreign currency. In this context, there is a possibility of slight devaluation of taka against dollar. In 2017, the exchange rate for a dollar might rise up to BDT80.84. The increasing inflation in the USA and overvaluation of dollar against other currencies are responsible for this situation,” the report added.

In FY2017, the inflation rate in Bangladesh is likely to remain at 6.2 percent, just like the previous two fiscal years, the report said. Bangladesh has dropped from the 61st position to the 62nd in the short-term political risk indicator of BMI report. The research said that the repositioning was based on the context of increasing violence and attacks on and by the Islamist extremist groups in Bangladesh. The report also said that if the Awami League government continues to view the ongoing threats of terrorist organizations from the narrow lenses of party politics, and deny the presence of foreign power-backed Islamist terrorism, the ongoing unrest will continue in the months to come.

The government initiatives taken in the current fiscal year to develop the transportation, communication, technology, and education sectors will accelerate the country’s mid-term and long-term economic growth, the report added. The revenue collection and expenditure targets of Bangladesh are quite ambitious, the report found. It suggested that in order to build itself up as a global competitor, Bangladesh will need to allot wellplanned funds to various sectors and overcome the infrastructural crisis. Even though the global demand will drop slightly, the current flow of export in the country’s RMG goods will persist in 2017. Export in the UK and the European countries will help to keep up the export growth in this sector, the report said.

Share With:

House No. 10/22 (2nd floor), Iqbal Road, Mohammadpur, Dhaka-1207 Telephone: 88-02-9185124, 01712193344 E-mail: firstnews2010@gmail.com

© 2015 First News. All rights reserved