Economic indicators to rise amid political calm: MCCI

Some economic indicators such as exports, imports and remittances will improve in the first quarter of the current fiscal year on the back of a stable political situation, a leading chamber has said.

Metropolitan Chamber of Commerce and Industry also identified private sector investment as a crucial factor in accelerating economic growth.

"It is assumed that the political situation will continue to remain calm in the first quarter," the chamber said in its quarterly review of the economic situation of Bangladesh for April-June.

The trade body predicted that export earnings in September will be $3.5 billion, while imports will be $4.5 billion and remittances $1.66 billion.

About private sector investment, the chamber said rising investment is a precondition for economic growth, but there are many impediments that have kept the domestic investment at a low level.

Entrepreneurs, whether local or foreign, are not encouraged to make any new investment in the present political environment, it said.

The chamber said foreign investors have adopted a 'go-slow' strategy in making fresh investments since 2013. Although public investment has increased, it cannot be an alternative to private investment, which is crucial to accelerating economic growth.

The damages inflicted by political unrest last year to the national economy also dented the confidence level of the investors, causing a slower growth in investment in the private sector, the MCCI said.

“Maintaining macroeconomic stability, restoring momentum in economic activities, enhancing revenue collection, raising investment, achieving the export target, containing inflation, and above all, improving law and order conditions will be the major challenges for the government.”

Adequate infrastructure and energy, skilled manpower, political stability and investment-friendly climate are also key factors in achieving higher economic growth.

The MCCI said the overall economic situation was positive, which was indicated by the steady improvements in the major economic variables in the just completed fiscal year.

“The economy experienced stable growth, inflation was under control, the exchange rate remained stable, and foreign exchange reserves rose and remained at a comfortable level.”

However, the chamber said the foreign exchange reserves may fall in July-September due to the payments to the Asian Clearing Union against imports.

Inflation may go up in September because of increased demand ahead of Eid-ul-Azha.

The trade body said the agriculture sector performed well in the quarter under review, but continuous government support with inputs and finance will be needed to sustain the sector's growth.

Performance of the manufacturing sector needs to be improved by removing bottlenecks in physical infrastructure and the crisis in power and energy supplies.

The services sector is doing well but will need government support to be able to recover the losses they suffered during the political unrest.

However, the chamber said, in order to achieve the government's growth and inflation targets, political stability is a must.

“Violence caused by political unrest hurts economic activities thus hindering growth and disrupts the supply chain of goods which pushes up inflation.”

On the fact that the World Bank has recognised Bangladesh as a lower middle income country, the chamber said the Organisation for Economic Co-operation and Development (OECD) has also upgraded the overall country rating by one notch for its economic resilience.

“The enhancement in OECD classification should lead to significant lowering of costs for Bangladesh's entrepreneurs and banks in securing guarantees and letters of credit confirmations,” the chamber said.

“The country's sovereign credit risk would also be lower and it will get more respect from international creditors and investors.”