Dhaka, Bangladesh (BB)– The central bank of Bangladesh has found out that the ongoing shortage of power and gas supplies will be the main obstacle to economic growth in the near future.
“The main near-term risk to the upbeat outlook is in the persistent shortages of power and gas supplies, disrupting production in installed capacities and slowing down investments for the new capacities,” the Bangladesh Bank (BB) said in its annual report for the fiscal 2009-10, its website said on Wednesday.
The central bank said near and medium-term growth prospects for the economy now hinge crucially on the implementation of the government’s plan for eliminating energy shortages, and adding, as fast as possible, new-generation capacities to private and public sector outlays.
Recovery from decline in manpower exports may prove more challenging, the report said, adding that the returning jobless migrants will pose significant employment challenge to the domestic job market.
“They will need to be assisted effectively in finding new employment in new host markets abroad; as also in taking self-employment initiatives by setting up SMEs locally,” the BB added,
The country’s inflation as measured by consumers’ price index (CPI) remained at higher single-digit level in the last six months of fiscal 2009-10 (FY10) breaching the 6.5 per cent ceiling targeted in FY10 for 12-month average CPI, according to the report.
In the first quarter (Q1) FY11 point- to-point inflation has eased slightly.
However, the 12-month average CPI continues creeping up due to the higher base effect in averaging, but will begin declining towards the 6.5 per cent level targeted in FY11 monetary programme from the second quarter (Q2) onward unless there is new sharp upsurge in point-to-point inflation.
“No looming near-term risk of such upsurge is apparent right now on the external or domestic front,” the BB said, adding that no major near-term domestic factor likely to cause sharp spike in CPI inflation in Bangladesh is apparent either; with labour unrests resolved in the RMG sector and with no pronouncement of government intent of any immediate upward revision of administered energy prices.
The report also said overheating of the asset markets not being primarily credit driven, impact of monetary and credit policy steps on asset price trends are unlikely to be extensive.
“Nevertheless, BB has taken feasible cautionary measures; including strict enforcement of regulatory limits on capital market activities of banks, requiring fire-walling between their banking and capital market businesses, higher provisioning requirements on capital market assets, prohibition of bank lending for land purchase, prior central bank review and clearance requirement on real estate acquisition proposals of banks, and discontinuation of refinance against loans for apartment purchase,” it noted.
The BB said the country’s economy retained firm footing in growth path, and indications of robust bounce back in external trade came out clearer by the close of FY10 despite weakened exports.
BBN/SI/AD-26Jan11-9:49 pm (BST)
