AppId is over the quota
Bangladesh has insufficient fiscal leeway to cushion the impact of a global slowdown and its growth outlook for the year to June 2012 is uncertain, the World Bank said on Tuesday, reports Reuters.
Areas of concern include an increasing fiscal deficit, high and volatile inflation, overshooting of monetary targets, financial sector weaknesses and growing external imbalances, it said.
The country's year to June 2011 growth rate of 6.7 per cent, helped by strong performance in the manufacturing and construction sector and a bumper harvest, can only be sustained if exports continue to grow, according to the World Bank's bi-annual economic update.
What would work in Bangladesh's favour are lower international commodity prices, particularly oil and food, the report said.
Bangladesh's government is grappling with high inflation and aims to bolster economic growth to 7.0 per cent in the 2011-12 fiscal year, driven by exports and inflows of remittances.
Exports, largely garments, rose 22 per cent year on year in the three months to September while funds from Bangladeshis working abroad rose 9.0 per cent, a slower pace of growth than the previous year.
AFP adds: Global economic uncertainty looks set to scupper Bangladesh's ambitious plans for 7.0 per cent economic growth in the current fiscal year, the World Bank said Tuesday.
The impoverished South Asian country had unveiled the growth target -- the highest since the mid-1970s -- in the budget in June, after it clocked 6.7 per cent growth in the previous 2010-11 fiscal year.
The World Bank said the same level of expansion "can only be repeated" if exports continue to grow.
Export growth, which stood at 30 per cent in the first two months to August, plunged to a meagre 2.3 per cent in September as apparel shipments to key markets in Europe and the United States lost steam.
"Bangladesh has limited room for manoeuvre to cushion the impact of a second global slowdown if it happens," said Sanjay Kathuria, the World Bank's lead country economist for Bangladesh.
"It can affect Bangladesh's balance of payments through its impact on exports and remittances, put pressure on the exchange rate and increase economic uncertainty which might weaken investment and growth," the bank said.
Foreign remittances, which make up 10 per cent of the country's gross domestic product (GDP), have faltered in the wake of the Arab Spring, with 40,000 Bangladeshi workers returning from Libya alone.
Manufacturing has also been hit hard by an energy crunch caused by the suspension of new natural gas connections by state-owned monopolies.
Our Staff Reporter adds: A slow pace of reforms in Bangladesh can affect its rate of investment, as can inadequate energy supply and poor quality of its infrastructure. The changes in trade reforms and weakening of the financial sector can also affect export growth and investment.
This was indicated by the latest bi-annual economic update of the World Bank (WB), released on Tuesday.
"Improved fiscal and monetary discipline, combined with stronger efforts to address energy and infrastructure deficits, will be critical to sustain the growth performance of Bangladesh," said Zahid Hussain, WB senior economist for Bangladesh.
The Washington-based lender, however, foresees a favourable tilt towards the Bangladesh's economy as it said the lower international commodity prices, particularly oil and food, can give a breathing space to the country in the current fiscal.
Senior economist for Bangladesh at Washington WB headquarters Lalita Moorty said: "It will be vital for Bangladesh to ensure sound macroeconomic management, since expansionary macroeconomic policies could increase risks on the current account and make inflation management more difficult."
In its economic update, the WB said slowdown of remittances in the last fiscal, high and volatile inflation, overshooting of monetary targets, financial sector weaknesses, growing external imbalances and increasing fiscal deficit as well as composition of deficit financing remain areas of concern for the Bangladesh economy.
Lead economist of WB Dhaka office Sanjay Kathuria said Bangladesh has limited room for manoeuvring to cushion the impact of a second global slowdown if it happens.
"Rapid growth in subsidies, sustained high rate of growth of credit to the private sector and monetary financing of the fiscal deficit have led to the decline in maneuverability," he added.
Noting that the Bangladesh economy grew at 6.7 per cent in fiscal year (FY) 2010-11 continuing its recent upward trend in growth, the WB stated that the growth rate last fiscal reflected good performance in the manufacturing and construction sectors, two successive years of bumper crop harvest and sustained high contribution from the services sector, it added.
The report, however, noted the country's strong performance in FY11 can only be repeated if exports continue to grow, apparel exports gain from the recent India-Bangladesh agreement, and remittances continue to recover and the investment is boosted by improved infrastructure services, particularly power.
The economic update noted a protracted global economic slowdown could affect Bangladesh through several channels.
Meanwhile, another multilateral capital donor -- the Asian Development Bank (ADB) -- in its latest development outlook said Bangladesh's economy is expected to grow at 7.0 per cent rate in the current fiscal due to continuous export growth and expansionary domestic demand for rising remittance and income flows.
Source: thefinancialexpress-bd.com
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