Dhaka, Bangladesh (BBN) – Both the old and new inflation base data indicate that inflation remains a key challenge of the country’s economy, the central bank has said.
The Bangladesh Bank (BB), the country’s central bank, has also identified three challenges for achieving the inflation target for the current fiscal year (FY) 2013-14 announced in the national budget is 7.0 per cent.
“First likely wage increases in both the public and private sectors which will create aggregate demand pressures,” the central bank said in it’s latest Bangladesh Bank Quarterly (BBQ) for April-June-2013.
The BBQ said the FY `14 budget includes a sizeable provision for a public sector wage rise and in the private sector the wage board for the garments industry has been established which will in turn have implications for the rest of the economy.
Another risk to food inflation in particular stems from possible supply-side disruptions if prolonged nationwide strikes take place and as in all years risks due to weather related factors affecting agricultural produce, the BB explained.
Finally the recent rise in Indian inflation could also transmit to Bangladesh as shown by historical long term trends, according to the BBQ.
Average inflation, using the 1995/96 base year, has been declining steadily over the past fifteen months, from a peak of 10.96 per cent in February 2012 to 7.70 per cent in June 2013, according to the Bangladesh Bureau of Statistics (BBS).
“This decline was driven by a steady fall in point to point food and non-food inflation until October 2012 when food inflation bottomed out at 5.57 per cent,” the BBQ said, adding that since then food inflation began to rise and in June 2013 is 8.53 per cent.
Non-food inflation fell from a peak of 13.96 per cent in March 2012 to 6.79 per cent a year later, the BBS data showed.
However, point to point non-food inflation has increased to 6.99 per cent in June 2013. Point to point inflation data using the 2005/06 base broadly shows similar trends to the pattern using the 1995/96 base though the absolute numbers differ, the central bank said.
Using the 2005/06 base, point to point food inflation has risen from 1.75 per cent in September 2012 to 8.26 per cent in June 2013. Point to point non-food inflation is steadily declining, having peaked in October 2012 at 11.28 per cent to 7.75 per cent in June 2013.
“The rise in food inflation is pushing up average inflation which bottomed out at 6.06 per cent in January 2013 and has risen to 6.78 per cent in June 2013,” it added.
The central bank also said the Gross domestic product (GDP) growth at constant market price, using the 1995/96 base, is estimated at 6.03 per cent in FY13, lower than 6.23 per cent growth of FY12 and the 6.2 per cent average for the previous decade.
“Slower growth in agriculture and services sector contributed to slower GDP growth,” the BB noted.
BBN/SSR/AD-2:32 pm (BST)
