WB upgrades growth forecast
The World Bank has upgraded the forecast for Bangladesh's economic growth this fiscal year to 6.5 percent on account of stronger consumption, export growth and near-term political stability.
Earlier in April, the WB forecast the GDP growth in fiscal 2015-16 would be 6.2 percent. The Washington-based multilateral lender's upgrade in growth forecasts comes on the heels of the Asian Development Bank.
The ADB tipped Bangladesh's GDP to grow at 6.7 percent this year, up from its March prediction of 6.4 percent.
The return of political stability in April and domestic activity, which had been disrupted between January and March, led the WB to upgrade its outlook.
The lender however raised questions about the Bangladesh Bureau of Statistics' preliminary growth figure of 6.5 percent for fiscal 2014-15.
“It shows a stronger economy related to fiscal 2014-15 despite political turmoil, depressed export growth, only a modest rebound in remittances and continued weakness in the private sector credit growth.”
While agricultural production has been healthy and services have recovered with domestic demand regaining strength, these alone cannot explain why growth in fiscal 2014-15 was higher than in fiscal 2013-14, according to the WB.
The GDP growth in fiscal 2013-14 was 6.1 percent.
The comments came in the report, 'South Asia Economic Focus Fall 2015', which was released yesterday.
Achieving the 7 percent GDP growth target outlined in the budget for fiscal 2015-15 while reducing inflation to 6.2 percent will be challenging, it said.
“All evidence suggest Bangladesh's potential GDP growth rate is no more than 6.5 percent given its demographics, feeble state of physical infrastructure and lingering political uncertainties.”
The WB also identified four main challenges in Bangladesh's progress, with the rising default loans a great worry. “There has been no visible reduction in nonperforming loans as habitual defaulters continue their delinquent behaviour with impunity.” Inaction on making the defaulters accountable has not helped change the game, it said.
Bangladesh has not made use of the low fuel prices in the world market to build fiscal space, which would allow an effective counter-cyclical response in the event of an economic slowdown, or to invest in infrastructure or human capital.
Reforms to improve the effectiveness of public expenditure and revenue administration are badly needed, while much of the reform agenda, including a broad-based reform of state-owned enterprises, remains to be implemented.
The country is not at significant risk from contagion related to the recent turmoil in international financial markets or slower growth in China, it said.
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