Restive politics to jolt economy badly

The Asian Development Bank (ADB) has said any political disruption in the run-up to the parliamentary polls and its outcome will pose a major risk to the economy.
As politics is back on stream ahead of the elections planned for December, the donor agency came up with the warning in its 'Asian Development Outlook 2008 Update' yesterday.
"Despite the uncertainty in the lead-up to the planned December 2008 election and its outcome, it is assumed that a smooth transition between governments will be seen," it said.
The ADB has said the government can consider a reduction in petroleum prices if Bangladesh no longer requires subsidy thanks to a further fall in global oil prices.
The lending agency said it would help cut inflation expectations, which it forecast to remain higher in fiscal 2008-09.
It said the accommodative monetary policy, executed by Bangladesh Bank, could trigger higher inflation if the credit expansion is not followed by any quick or substantial supply response.
The Manila-based organisation said Bangladesh's central bank might require an increase in interest rates to 'anchor inflation'.
“If the price of diesel in the international market falls below a level where no subsidy is required, then the government can consider passing on the benefit of lower prices to the consumers,” said Mohammad Zahid Hossain, head of programmes, Bangladesh Resident Mission, ADB.
'It will also have a positive impact on inflation,” he added.
The ADB expects that Bangladesh's economy would grow at 6.5 percent in FY 2008-09 as agriculture and industry could pick up, buoyed by farmers' response to high food prices and improved business confidence.
It however said some downside risks-- higher oil and commodity prices, political uncertainty in the run up to the promised parliamentary election in December, and natural disasters like cyclone could undermine the outlook.
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