ADB projects FY ’10 GDP at 5.5 per cent

April 15, 2010

The Asian Development Bank (ADB) has forecast a 5.5 per cent gross domestic product (GDP) growth for Bangladesh in the current fiscal year, down from the official target of 6.0 per cent.

“The slowdown is partly due to the effects of depressed external demand of Bangladesh’s mainly low-end garment products,” the lending agency said in its development outlook for Bangladesh in Dhaka Tuesday.

The ADB’s GDP growth projection came a day after the International Monetary Fund (IMF) projected the growth at 5.0 per cent. But the government is still upbeat about a 6.0 per cent growth.

The Manila-based lender said Bangladesh’s economy would start to rebound from the finical year 2011 when the economy will grow to 6.3 per cent, underpinned by the global recovery and strengthened business confidence and investment.

The Asian Development Outlook 2010, launched across the Asia-Pacific region Tuesday, said among the South Asian countries, the GDPgrowth is likely to ease slightly in Bangladesh and Nepal although other countries’ might pick up.

“South Asia is led by a projected 8.2 per cent performance in India, but also strong growth in Sri Lanka (6.0%), as it continues to benefit from its recent return to peace after a long ethnic conflict,” it said.

The outlook projected that Pakistan is likely to pick up, with growth of 3.0 per cent in the current financial year reflecting better domestic economic fundamentals, while growth is likely to ease slightly in Bangladesh and Nepal.

Head of the country programme at ADB Dhaka office, M Zahid Hossain, said Bangladesh’s agricultural growth would be moderate coming to 4.1 per cent in Fiscal Year (FY) 2010 from 4.6 per cent achieved in FY2009.

“Industrial growth will slow down to 5.6 per cent this fiscal against 5.9 per cent last fiscal, but will grow robustly at 7.5 per cent in FY2011, with recovery in global demand and improved domestic business confidence that will raise construction and investment,” he said.

Service sector growth would grind to 5.9 per cent from 6.3 per cent in FY2009, reflecting weaker performance in agriculture and industry and trade and transport activities, Mr Hossain told reporters.

On external trade, the ADB Dhaka office’s programme head said the export growth is projected to slow down to 5.0 per cent in FY2010 from 10.1 per cent in FY2009.

“Based on orders received, exports are set to perform better in the remaining months of FY2010 but the decline in the first seven months will hold down the annualgrowth,” he said adding: “with continued global recovery export growth is projected to rise to 11 per cent in FY2011.”

The Manila-based lending agency has forecast that excess liquidity in banks and international commodity price pressure are expected to stoke inflation to 7.5 per cent in the current fiscal.

Mr Zahid Hossain praised the revenue collection rate, saying it is a good sign for the economy and its recovery.

“The government’s revenue target this fiscal will be achieved,” he said adding the budget deficit is expected to be contained within the budgeted level of 5.1 per cent.

He laid emphasis on the improvement of the infrastructures, especially gas and power supply, to attract more investment which is very much crucial to Bangladesh’s economy and its becoming a middle-income country.

ADB country director in Dhaka Paul J Heytens said they are hopeful that the country’s power supply situation would improve within a couple of years as some new power plants are being constructed for generating power.

“We are giving financial support to the government to set up some power stations like Siddhirganj 240-megawatt (mw) peaking power plant, Sirajganj 150mw and Khulna 150mw power plants, which will come into operation within next year,” he said.

The Dhaka office programme head M Zahid Hossain said the external current account is expected to show a surplus of 1.8 per cent of GDP in FY2010. In FY2009, the surplus was 2.8 per cent of the total GDP size.

The ADB outlook has also identified some risks like failure of planned measures to address growing power and gas shortages, and business confidence weakened by a lack of progress in economic and governance reforms, he said.

ADB projects FY ’10 GDP at 5.5 per cent

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