Dhaka, Bangladesh (BBN) – The overall economic growth is likely to come down to 6.2 per cent from the targeted 6.5 per cent by the end of this fiscal due mainly to the ongoing global financial crisis, the central bank of Bangladesh said.

“The country’s gross domestic product (GDP) for the fiscal 2008-09 may come down near to 6.2 per cent from 6.5 per cent if the impact of the financial crisis is deeper,” senior official of the Bangladesh Bank (BB), the country’s central bank, told BBN in the capital, Dhaka on Saturday.

Bangladesh government in its budget document had predicted 6.5 per cent growth in the fiscal FY09 assuming that there would be no major natural disaster.

He also said Bangladesh’s export sector particularly readymade garment (RMG) export is most vulnerable to the fallout effects of the financial crisis.

Despite positive growth in 2008, economic growth in countries like USA and the European Union (EU) is bleak in 2009, the central bank’s policy analysis unit (PAU) said in a report, released on Thursday..

The policy paper styled ‘Navigating the Global Financial Storm: Challenges for Bangladesh’ also said this might affect both Bangladesh’s export volume and export prices, but the impact on export prices is likely to be dominant in RMG sector.

“Since the RMG sector accounts for about 40 per cent of the country’s manufacturing output and provides support to a variety of ancillary industries and services, analysis at PAU shows that, in the event of deeper slowdown in this dominant export industry, GDP growth would reduce to the lower bound (6.2 per cent) of PAU projection for FY09,” the study added.

The PAU earlier indicated on the basis of its preliminary analysis that it would be possible to achieve GDP growth in the range of 6.2 per cent and 6.5 per cent in FY 09 following continuation of the favorable conditions and strengthening of growth-supportive policies.

In the event of prolonged recession in the advanced economics, remittance growth from theses countries may face temporary setback, according to the study report.

For RMGs, orders are not likely to dry up in the western markets. However, situations may arise in which the buyers may ask for longer credit periods and other facilities, it added.

“In order to meet such exigencies, if required, the BB can issue directives to banks to provide pre-and post-shipment credits for longer periods and allow rescheduling of loans,” the PAU suggested.

The newly elected US President’s economic agenda of tagging labor and environmental standards with trade, although unlikely to affect the volume of transactions in the near term, is an area of concern for Bangladesh, according to the study report.

“Bangladesh needs to be well prepared to adopt appropriate strategy since the issue, though dropped from the ongoing Doha negotiations within the World Trade Organization (WTO), is likely to be brought back by the US when the current round concludes,” it noted.

BBN/SI/SS/AD-22November08-8:50 PM (BST)