The growth in Bangladesh's gross domestic product (GDP) will slow down to 6 percent in the coming fiscal year on the back of lower agricultural growth, rising inflation and political uncertainty, according to a report.

The report, prepared by global financial giant Citi, also warned further slowdown in garment exports and a continued upward trend in inflation. A slowdown in the US could also affect exports from Bangladesh, the report predicted.

“2007 was a difficult year for Bangladesh. Amid continued political uncertainty and rising food prices, the occurrence of floods and a devastating cyclone have resulted in considerable damage across sectors. Slowing agricultural production, coupled with a moderation in industrial production and a deceleration in investment activity, will likely result in GDP coming in at 6 percent levels in FY08 and FY09 from the 6.5 percent growth seen the previous year,” said the report 'Economic and Market Analysis: Bangladesh' that was released yesterday.

Terming the political scenario 'still in limbo', the report said more than a year after the caretaker government came to power and declared a state of emergency on January 11, 2007, Bangladesh continues to face a challenging political environment. “The state of emergency is still in place, the ban on indoor politics has been lifted only in Dhaka, and the army continues to play an important role. However, the interim government has pledged to hold elections by end-2008,” the report said.

About the clampdown on corruption, the report said perhaps the most visible reforms are the government's clampdown on corruption. “The Anti-Corruption Commission has so far arrested over 200 politicians and businessmen, including the high-profile arrests of former PMs Sheikh Hasina, leader of the Awami League, and Khaleda Zia, of the BNP. While the clampdown on corruption is positive over a longer horizon, an immediate consequence has been dampening investment activity and slowing business confidence,” it said.

In the report, the Citi stated two major concerns for Bangladesh in FY'09. The first is double-digit inflation continues to persist, largely on the back of rising global and domestic food prices. Another concern is the slowdown in exports of knitwear and woven goods. While garment exports held up well after the MFA phase-out, recent trends have been worrying. Looking ahead, if the slowdown in the US worsens, export growth will likely take a further hit, given that the US comprises 33 percent of Bangladesh's RMG exports. The end of quota restrictions on China and higher raw material prices would also have an adverse impact.”

To this end, it is important for Bangladesh to improve intra-regional trade and better avail of benefits under the GSP (generalisd system of preference) as well as improve productivity in the sector, the report suggested.

The report also recommended a special focus on telecom. “Growing liberalisation and an emphasis on privatisation have made the telecom sector in Bangladesh among the most vibrant. The entry of a number of foreign players has infused competition and lowered tariffs. However tele-density remains low on a comparative basis, indicating potential for further growth,” the report said.