Lower GDP growth projected

Lower GDP growth projected

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Unnayan Onneshan, an independent multidisciplinary think-tank, in its current issue of the Bangladesh Economic Update projected the country’s GDP growth rate to be 5.75 percent in the current fiscal year against the government target of 7.2 percent.It also reveals that the economy of Bangladesh has been major macroeconomic challenges, culminating into contraction rate of growth in gross domestic product (GDP) this fiscal year.

“The gap between savings and investment has increased at a high rate over the time and the lack of matching infrastructure development by the government and the private sector due to lack farsightedness in operating fiscal policy on the one hand and increase in cost of loanable funds due to contractionary monetary policy on the other have suppressed investment demand,” adds the think-tank.

The investment as percentage of GDP has remained 25.9 percent against the required rate of 31.4 percent, revealing a gap of 5.5 percent in FY 2011-12.

Against the business as usual scenario, the Unnayan Onneshan cautions that the saving –investment gap might reach at 5.14, 5.47 and 5.81 percent of the nominal GDP in FY 2012-13, FY 2013-14 and FY 2014-15 which may further create pressure on the growth trends whereas eight percent rate of growth in GDP has been targeted in the Six Five Year Plan of the government.

As regards the revenue income, the Unnayan Onneshan reasons the non-achievement of the target primarily due to fall in tax-revenue income from the large enterprises like banking sector as well as political instability.

The Unnayan Onneshan notes that the bulk of the foreign financing has come
in the form of medium- and long-term (MLT) loans to the public sector.
During July-January of FY 2012-13, MLT loans have increased by USD 456
million.

The rate of growth in industrial sector has decelerated due to reduction in
investment demand, increased cost and reduced supply of investible capital
and inapt policy regime, adds the Unnayan Onneshan.

According to the think tank, the capital market of Bangladesh has been
witnessing continuous fall due to erosion of confidence amongst investors.
“The absence of confidence has persisted as the government has failed to
bring the perpetrators of two crushes to book and the regulatory regime is
yet to enforce zero-tolerance on the activities of the cartels,” observes
the Unnayan Onneshan.  UNB

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