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World Bank cuts Bangladesh's Growth Rate

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Henry

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Feb 25, 2012
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The World Bank (WB) yesterday downsized the growth projection for Bangladesh at around 6% in the current fiscal year from the government’s ambitious target of 7.2% due to constraints in external demand and domestic investment.
“The real GDP growth in FY (fiscal year) 13 is projected at around 6%. We hope that a healthy growth trend would continue in the current fiscal despite various constraints as there’s a sign of improvement in macroeconomic management,” said Zahid Hussain, senior economist, at the
World Bank.
He was presenting the ‘Bangladesh State of the Economy Outlook’ at a press conference at its office in Dhaka.
Earlier, the International Monetary Fund (IMF) projected a GDP growth of 5.8% while the Asian Development Bank (ADB) said Bangladesh’s economic growth may slow down to 6% in the current fiscal year against government’s target of 7.2%.
Bangladesh achieved 6.3% economic growth in the last fiscal year (2011-2012) which was 6.7% in fiscal 2010-2011.
The Word Bank also identified four key internal and external risks that Bangladesh would face in the future.
These are intensification of the euro area crisis, escalation of global food and oil prices as balance of payments vulnerability to an international oil price shock has increased, heightened risk in the banking sector, increased political uncertainty in the run up to
|elections.
The global lending agency said tighter monetary policy and favourable international price trends have decelerated inflation, fiscal policy is back on track, sound exchange rate management has eased pressure on the balance of payments and growth performance remains below target due to weak global economy and infrastructure constraints.
World Bank country director Ellen Goldstein said they are monitoring the financial sector of Bangladesh very closely given the recent concern in the banking supervision side.
“Bangladesh continues to suffer from some other major structural problems, including persistent electricity and gas shortages and less than optimal investment climate and this continue to hold Bangladesh’s growth below to what the country is capable of
achieving,” he said.
Asked about the specific growth projection of the lending agency, Ellen said it could be around 6%, or 6.2, 6.1 or 5.9%. “Considering weak global economy, it’s not a bad performance for Bangladesh. But, obviously the country would do better.”
The World Bank’s senior economist said achieving desired 7.2% growth in FY 13 would be a challenging proposition because of two factors - weak external demand and domestic investment constraints continue to drag growth below potential.
Answering a question, Zahid Hussain observed Bangladesh could achieve 6.5% or even more growth rate in the current fiscal if there is close surveillance of macroeconomic development, stronger monitoring and supervision of banks, improved infrastructure management and building policy space by pressing ahead on tax reforms, harnessing concessional external; resources and improving expenditure
management.

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