Citi projects GDP growth at 6.1pc for next fiscal year

Star Business Report

Bangladesh's economy is expected to grow at 6.1 percent in the next fiscal year (2010-11) after two years' growth of less than 6 percent, Citigroup forecasts on Bangladesh yesterday.

The economy grew at 5.9 percent in fiscal 2008-09 and set to grow 5.7 percent this year, according to the projection. Earlier, the economy had grown 6 percent plus rate since fiscal 2004-05.

“Trends so far indicate that estimates could be achieved, with industrial production growing at a healthy pace,” said the group in an outlook report.

Lauding the government's thrust on infrastructure development, the Citigroup sees it as encouraging. It said this thrust could result in more investments.

However, there are some downside risks, including low agriculture production, poor implementation of the government's various initiatives and a decline in manufacturing production, particularly due to sluggish demand for textile exports, it said.

The group has also identified inflation as a risk in future.

Growth in Bangladesh has historically remained firmly above 6 percent on year-on-year levels in spite of natural disasters, political volatility and governance issues.

In FY 2008-09, gross domestic product (GDP) was up 5.9 percent despite weak global growth. The group expects GDP to sustain at 5.7 percent growth this fiscal before recovering further to 6.1 percent in 2010-11.

Citigroup estimates are based on an upturn in industry and services. It said industry now comprises close to 30 percent of GDP from 20 percent levels earlier.

“We expect the government's thrust on infrastructure development to fuel further growth, particularly in construction, manufacturing, and in the power sector,” it projects.

Growth in exports has been a major driver in Bangladesh economy during the recent years. Exports comprise around 17 percent of GDP and have been growing at an average rate of around 11percent year-on-year over the last ten years. And the key driver has been textile exports, which account for around 75 percent of total exports.

“Trends are erratic, but it should gather pace in fiscal 2010-11,” the group said in the outlook. Monthly trends have been extremely erratic with growth during July-September (FY10) down 11.7 percent.

While trends in remittances are expected to remain buoyant, rising imports could result in the current account surplus narrowing to 1.7 percent of GDP in the next fiscal year from estimated 2.5 percent this year.

On the currency, the group expects Taka to continue its depreciating trend, to average Tk 71.6/$ in FY 2009-10.

It said the recent success of the Grameenphone IPO (the biggest since independence in 1971) could enhance the attractiveness of the domestic equity market to foreign investors.

The projection also said the fiscal deficit will remain within the GDP target of 5 percent.