The Asian Development Bank (ADB) has upgraded its growth projection for Bangladesh economy from 6.0 per cent to 6.5 per cent in the current fiscal 2005-06.
The Bank in its latest Quarterly Economic Update (QEU) released Monday forecast 6.5 per cent growth. In the QEU for July-September period, the forecast was 6.0 per cent.
However, achievement of projected economic growth rate at 6.5 per cent for the fiscal 2005-06 will largely depend on the peaceful political condition over the next few months leading to the next general election.
"We are very hopeful that the country would be able to achieve the targeted GDP (gross domestic product) growth rate as some sectors including agriculture, industry and service have been performing well and showing positive trends," said the country director of the Asian Development Bank (ADB) Hua Du.
She said although the prices of oil and food increased recently, it is possible to achieve the GDP target in a peaceful political condition.
Hua Du was speaking at a press briefing, held on the occasion of the release of the latest QEU at the ADB Dhaka office.
The oil import bill is projected to increase to $ 2.0 billion during the current fiscal from $1,602 million in FY 2005, the report said.
Despite the recent hike in fuel prices the subsidy remains high at about $ 520 million or 0.8 per cent of the GDP.
She said though some sectors have been performing well the revenue collection is not up to the expected level.
Hua Du said in pursuance of the achievement of the targeted growth rate the country would face some downside risks including the long-term consequence of the loss of quotas for the RMG sector, the knock-on effects of high global oil prices, weak governance and political uncertainty.
The ADB report said the agriculture is expected to stage a significant recovery while the aus production increased by 16.7 per cent and aman registered a rise by 10 per cent during the first quarter of the FY 2005-06 compared with yields of the same rice crops in the preceding year.
It said the boro production is broadly depending on the weather condition and sufficient supply of agro-inputs like diesel and fertiliser.
The report said in the first four months of the current fiscal the output of medium and large scale manufacturing expanded by a strong 13.3 per cent while the output of the small scale manufacturing increased by 9.5 per cent compared with that of the corresponding period of time of the preceding fiscal.
The report observed that the country had witnessed a robust growth in trade, construction, transport sub-sector, cell phone usage, the emergence of private TV channel networks and expanding healthcare services.
The report said although some progress in the fiscal management has been achieved, the growth in revenue collection continues to be below the level envisaged.
In the six months of the fiscal year until December 2005, revenue under the National Board of Revenue (NBR) increased by 13.8 per cent compared with the same period of the preceding year, the ADB report said.
During the period the domestic indirect taxes and income taxes registered high growth rates of 18.5 and 18.7 per cent respectively, the report said adding the growth rate of import-based taxes was below expectation at 9.4 per cent.
The report predicts the overall budget deficit during the current fiscal at less than 4.5 per cent of the GDP, mainly due to underperformance in development spending.
During July-November of the current fiscal the export, specially the RMG products, grew by 12.7 per cent compared with the preceding year, the report said adding though the knit export registered a higher growth at 24.7 per cent the woven export grew only by 1.2 per cent.
The import growth declined sharply by 11 per cent during July-November period of the current fiscal due mainly to fall in import of foodstuffs.
The report said despite a larger trade deficit, the current account recorded a surplus due mainly to strong growth in workers' remittances.
The foreign exchange reserves dipped to US $ 2.4 billion at the end of November 2005, but recovered to $ 2.8 per cent at the end of December 2005, mainly due to the release of funds from the development partners.
On an annual average basis the inflation increased to seven per cent in December from 6.7 per cent in July, caused by the depreciation of the local currency, an increase in food prices, rise in prices of commodity in international markets and an increase in the domestic administered price of oil, the report said.