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The Asian Development Bank (ADB) forecast Wednesday a 5.3 per cent growth in the gross domestic product (GDP) of Bangladesh in the 2004-05 fiscal year compared to a 5.5 per cent growth last fiscal
"Despite widespread and destructive flooding, the country's GDP growth is expected to slow only moderately, aided by flood-damage reconstruction efforts and continued expansion in export-oriented industry and services," the ADB in its Asian Development Outlook 2005 said.
The ADB's flagship annual economic publication was released simultaneously in Dhaka and elsewhere in Asia. The bank's Dhaka office-in- charge Hua Du, senior economist Rezaul Karim Khan spoke on the occasion.
It also indicated that the country's economy would grow by 6.0 per cent in both the 2005-06 and 2006-07 fiscal years with its budget and external deficits remaining within manageable levels.
The outlook identified the possible adverse impact from the phase-out of MFA quota system, an abrupt increase in the oil prices and intensification of confrontational politics as the key downside risks of the country's medium-term economic growth.
It also suggested that prudent policy measures, especially in the development of country's infrastructure, improvement of governance, removal of existing structural impediments and ensuring a congenial investment climate, are needed to help mitigate those risks.
Highlighting the country's major economic indicators, the ADB officials said the rate of inflation is expected to accelerate to 7.0 per cent in the cur rent fiscal due to the increase in the rice prices triggered by poor 'aman' harvest coupled with a significant rise in petroleum prices.
The ADB officials also prescribed a tight monetary policy for the government to check the current inflationary pressure.
"The inflation is likely moderate to 5.0 per cent by the fiscal 2006-07 with the increase in crop production along with a gradual reduction of petroleum subsides by the government," said the outlook.
The country's merchandise exports are likely to grow by 15 per cent in the 2004-05 fiscal primarily because of a steady uptrend in garment exports, especially the knitwear items, it mentioned.
It, however, predicted that the country's export growth might decline to 10 per cent and 8.0 per cent in the 2005-06 fiscal and the 2006-07 fiscal respectively as more intense global competition limits expansion of garment trade.
Projecting a 20 per growth in the country's merchandise imports for the current fiscal, the ADB also predicted that the growth might be 16 per cent in the next fiscal and 13 per cent in the 2006-07 fiscal.
Despite an increase in the workers' remittances, a widening trade deficit is expected to push the current account into a $ 600 million shortfall or 1.0 per cent of the GDP during the fiscal 2004-05, the outlook revealed.
"During the fiscal 2004-05, the fiscal deficit is likely to worsen to 4.7 per cent of the GDP, reflecting increasing expenditures in the face of weak revenue performance," it said.
The bank also suggested that the government should initiate steps to boost domestic resources while rationalising its expenditures.
Despite recent improvement, the country's capital market stills remains underdeveloped with the total market capitalisation calculating a mere $ 3.8 billion at the end of 2004, it observed.
Responding to a query, Du said the bank was yet to be reported to have any adverse impact of the multi-fibre arrangement (MFA) phase-out on the country's garment industry.
The ADB, however, said "the government should make extra efforts to promote diversification of the export base and enhancement of competitiveness so as to encourage foreign direct investment (FDI), especially in the garment industry,"
Responding to another question whether or not the confrontational politics may create any adverse impact on the country's economic growth, she said the people has started realising the fact that such politics is not good at all.
Meanwhile, in its outlook said despite high oil prices and devastating tsunami, developing countries in Asia will experience robust 6.5 per cent growth in 2005 and continue a healthy economic expansion with 6.6 per cent and 6.9 per cent in the years 2006 and 2007 respectively.
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