Inflation may rise on polls: ADB

The Asian Development Bank has said inflationary pressure may rise in the run-up to the year-end national elections.
“Personal spending may rise during the forthcoming national and upazila elections, crating upward price pressures,” the ADB said in its quarterly economic update for July-September 2008, released on Friday.
The report however said inflation is likely to remain within the previous projection of about 9.0 percent for FY2009, with an earlier surge in commodity prices offset by a recent pullback.
The inflation rate grew 10.2 percent year-on-year in September 2008 from 10.0 percent in June, before easing back to 7.3 in October because of a fall in food and other commodity prices, it added.
The Manila-based multilateral lender also echoed the World Bank in forecasting the country's lower economic growth because of possible impacts for the global financial crisis.
The ADB projected Bangladesh's gross domestic product (GDP) growth in a range between 5.5 percent and 6.0 percent for this fiscal year. The WB said the GDP growth might go as low as 4.8 percent -- a chilling forecast that prompted flak from the finance adviser and the Bangladesh Bank governor.
“The global financial crisis will put a mild brake on Bangladesh's economic growth rate for fiscal 2009, although continued strength in its agriculture and industries sectors will limit the downslide,” the Quarterly Economic Update said.
“With dampened global demand expected to weigh on exports and remittances, GDP growth in the current fiscal year is now projected to fall in a range of 5.5 percent to 6 percent,” it said.
According to the ADB estimate, industry has performed relatively well so far this fiscal year, supported by further growth in readymade garment output, along with continued recovery in housing and construction and improved business confidence.
However, the unfolding financial crisis will create a modest slowdown in demand, slumping industrial growth in the year to 6.7 percent against the projected 7.9 percent. In FY2008, industrial output expanded by 6.9 percent.
"To sustain the relatively strong growth rate, steps will need to be taken to urgently address shortages in power and gas supplies."
On the services sector, the bank said it is expected to grow 5.7 percent to 6.2 percent, down from previously projected 6.8 percent. In FY2008, the sector grew by 6.7 percent.
The quarterly report said: “The services sector is likely to see some mild pressure from a slowdown in exports and domestic demand, stemming from the global crisis.”
The bank said a sharp decline in international commodity and intermediate goods prices should reduce domestic prices, but if importers adopt a cautious approach in opening letters of credit, supply shortages could occur, generating further upward price and inflationary pressure.
The report also made a set of suggestions, including an increase in public investment, to create employment.