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http://www.dhakatribune.com/business/2016/jul/28/citi-gdp-growth-gathers-pace
today's paper >> business >> published: 01:36 july 28, 2016
Citi: GDP growth gathers pace
Tribune Business Desk
The US-based Citibank NA remained hopeful about Bangladesh’s economic growth prospect.
In its latest half yearly economic update released yesterday, the bank said: “Bangladesh has managed to set growth on a higher trajectory, posting GDP growth of 7.05% in FY16 on the back of surge in both private and public investment as well as increase in consumption expenditures.”
To achieve sustainable growth and investment, it is imperative to reap the benefits of the favorable demographic characteristics of a large working population, it said.
“Enhancing the quality of the workforce and addressing the skill gap will help align the supply side factors with supportive fiscal measures.”
Pointing finger at the country’s recent economic growth, the bank said higher implementation of Annual Development Program and higher consumption driven by new pay scale for public sector employees and moderate inflation helped boost the GDP growth.
GDP growth target for FY17 has been set at 7.20%, while the target is to achieve 8% by 2020 as per the government’s 7th Five Year Plan. To support the growth, investment-GDP ratio of 34.40% has been aimed for the same period from the existing level of 29.38%, it said.
About the local currency versus greenback, it said the demand for dollars subsided briskly in March with growing exports as the pair fell to 78.40 in early March, a level which has prevailed since then. While Taka has remained robust, many of Bangladesh’s trade partner countries have seen their currencies weaken against US dollars.
Under the circumstances, it warned that the primary challenge lies in promoting investor confidence and thereby increasing import of capital stocks in productive sectors to take advantage of lower costs induced by exchange rate benefits, which will eventually help in easing appreciation pressure on Taka.
Average inflation slid to 12 year lows to 5.92% in FY16 on the back of low food inflation, which was well below the government’s target of 6.20% for the period. Good domestic harvest, low international commodity prices and political stability helped in keeping inflation manageable. Food inflation dived to 4.92% from 6.68% in the past fiscal. However, non-food inflation surged to 7.45% from 5.99% during the same period.
It said the lagged impact of the new pay scale for government employees and upward adjustment of gas and electricity prices drove the non-food inflation higher, however, a cut in fuel prices in April helped in limiting the non-food inflation during May and June.
Following the recent upsurge in private sector credit, a highly expansionary fiscal policy and spike in oil prices in the global market, the Citi said, “Prudent macroeconomic management is warranted to contain inflation within 5.80% target set for FY17 in the national budget and monetary policy.”
Export posted a healthy 9.72% growth in FY16 to reach US$34.24 billion compared to $31.21 billion in FY15. The export numbers also beat the FY16 target of $33.50 billion by 2.21%. The Ready Made Garments (RMG) sector grew by 10.21% raking in $28.09 billion.
“While the growth in RMG sector is commendable, it is also a cause of concern from diversification aspect as it accounted for over 82% of the earnings,” said the banking giant.
It said improvement in workers’ safety standards and gradual migration to manufacturing of high-value apparel items have helped in boosting the exports. Exports to the US, the biggest single market for Bangladesh, was resilient despite the suspension of the generalized system of preferences.
In FY16, Bangladesh’s exports to US grew 7.5% to $6.20 billion. Given UK’s decision to leave the EU, it is crucial for Bangladesh to ensure existing preferential terms are maintained as UK is one of the major RMG export destinations for Bangladesh.
In order to achieve sustainable export growth, it put importance on ensuring infrastructural support and sound business climate is the key to attracting investors to economic zones and achieve the much desired export basket diversification.
About the declining remittances despite growth in overseas jobs, it said the Gulf countries, which host a large Bangladeshi diasporas accounting for over 65% of Bangladeshi workers abroad has been bearing the brunt of continued low oil prices. “This has led to lower spending on infrastructure and construction projects, which provides employment for most Bangladeshi workers abroad.”
“In addition, the weakening of other currencies in some of these countries in the recent months also put a negative impact on inward remittance.”
Bangladesh Bank has projected FX reserves to grow to $33 billion by the end of FY17 in the monetary policy statement and have indicated that large infrastructure projects may be implemented using the reserves under the large current account surplus scenario to stimulate private investment.
- See more at: http://www.dhakatribune.com/business/2016/jul/28/citi-gdp-growth-gathers-pace#sthash.ovmXCrC2.dpuf
today's paper >> business >> published: 01:36 july 28, 2016
Citi: GDP growth gathers pace
Tribune Business Desk
The US-based Citibank NA remained hopeful about Bangladesh’s economic growth prospect.
In its latest half yearly economic update released yesterday, the bank said: “Bangladesh has managed to set growth on a higher trajectory, posting GDP growth of 7.05% in FY16 on the back of surge in both private and public investment as well as increase in consumption expenditures.”
To achieve sustainable growth and investment, it is imperative to reap the benefits of the favorable demographic characteristics of a large working population, it said.
“Enhancing the quality of the workforce and addressing the skill gap will help align the supply side factors with supportive fiscal measures.”
Pointing finger at the country’s recent economic growth, the bank said higher implementation of Annual Development Program and higher consumption driven by new pay scale for public sector employees and moderate inflation helped boost the GDP growth.
GDP growth target for FY17 has been set at 7.20%, while the target is to achieve 8% by 2020 as per the government’s 7th Five Year Plan. To support the growth, investment-GDP ratio of 34.40% has been aimed for the same period from the existing level of 29.38%, it said.
About the local currency versus greenback, it said the demand for dollars subsided briskly in March with growing exports as the pair fell to 78.40 in early March, a level which has prevailed since then. While Taka has remained robust, many of Bangladesh’s trade partner countries have seen their currencies weaken against US dollars.
Under the circumstances, it warned that the primary challenge lies in promoting investor confidence and thereby increasing import of capital stocks in productive sectors to take advantage of lower costs induced by exchange rate benefits, which will eventually help in easing appreciation pressure on Taka.
Average inflation slid to 12 year lows to 5.92% in FY16 on the back of low food inflation, which was well below the government’s target of 6.20% for the period. Good domestic harvest, low international commodity prices and political stability helped in keeping inflation manageable. Food inflation dived to 4.92% from 6.68% in the past fiscal. However, non-food inflation surged to 7.45% from 5.99% during the same period.
It said the lagged impact of the new pay scale for government employees and upward adjustment of gas and electricity prices drove the non-food inflation higher, however, a cut in fuel prices in April helped in limiting the non-food inflation during May and June.
Following the recent upsurge in private sector credit, a highly expansionary fiscal policy and spike in oil prices in the global market, the Citi said, “Prudent macroeconomic management is warranted to contain inflation within 5.80% target set for FY17 in the national budget and monetary policy.”
Export posted a healthy 9.72% growth in FY16 to reach US$34.24 billion compared to $31.21 billion in FY15. The export numbers also beat the FY16 target of $33.50 billion by 2.21%. The Ready Made Garments (RMG) sector grew by 10.21% raking in $28.09 billion.
“While the growth in RMG sector is commendable, it is also a cause of concern from diversification aspect as it accounted for over 82% of the earnings,” said the banking giant.
It said improvement in workers’ safety standards and gradual migration to manufacturing of high-value apparel items have helped in boosting the exports. Exports to the US, the biggest single market for Bangladesh, was resilient despite the suspension of the generalized system of preferences.
In FY16, Bangladesh’s exports to US grew 7.5% to $6.20 billion. Given UK’s decision to leave the EU, it is crucial for Bangladesh to ensure existing preferential terms are maintained as UK is one of the major RMG export destinations for Bangladesh.
In order to achieve sustainable export growth, it put importance on ensuring infrastructural support and sound business climate is the key to attracting investors to economic zones and achieve the much desired export basket diversification.
About the declining remittances despite growth in overseas jobs, it said the Gulf countries, which host a large Bangladeshi diasporas accounting for over 65% of Bangladeshi workers abroad has been bearing the brunt of continued low oil prices. “This has led to lower spending on infrastructure and construction projects, which provides employment for most Bangladeshi workers abroad.”
“In addition, the weakening of other currencies in some of these countries in the recent months also put a negative impact on inward remittance.”
Bangladesh Bank has projected FX reserves to grow to $33 billion by the end of FY17 in the monetary policy statement and have indicated that large infrastructure projects may be implemented using the reserves under the large current account surplus scenario to stimulate private investment.
- See more at: http://www.dhakatribune.com/business/2016/jul/28/citi-gdp-growth-gathers-pace#sthash.ovmXCrC2.dpuf
hope you prosper and grow at 10% growth rate in future.
