Dhaka, Bangladesh (BBN) – Bangladesh economy is expected to grow at a rate of 5.7 percent in the fiscal 2009-10 (FY10), the US-based Citigroup has said in its latest projection.
The Citi, however, has revised upward its earlier projection made in April this year at 5.1 percent.
“While growth in FY10 is likely to slow to 5.7 per cent levels from 5.9 per cent in FY09, the new government’s thrust on infrastructure development is encouraging and would help support industrial activity,” the Citigroup said in a report released Friday from Mumbai, India.
Finance Minister of Bangladesh AMA Muhith in his budget speech, delivered on June 11 last in the national parliament, projected the growth between 5.5 and 6.0 per cent in the coming fiscal.
The report titled ‘Citi’s ASIA Macro and Strategy Outlook: Balancing Act after the Rebound Importance’ also said Inflation could be exacerbated by higher food prices on the back of Cyclone Aila in May 2009.
It also said that export growth is still positive on a cumulative basis, but monthly trends remain erratic. The rising oil prices could be yet another factor, according to the report.
The Citigroup, however, suggested that the country’s agriculture sector needs a close watch in view of the possible slowdown, thus, leaving an impact on ‘headline’ growth.
Although the share of agriculture to GDP has declined to 19 percent from 26 percent levels earlier, the sector provides employment to 65 percent of the labor force.
Monetary indicators point to some slowdown. Broad money growth during July-Mar of FY09 was up 11.9 per cent year-on-year basis from 17.6 per cent in the last year, while credit growth was up 11.5 per cent from 21 per cent in the previous year, according to reports.
“While the Bangladesh Bank could continue to pursue an accommodative monetary policy in the coming months, trends in inflation and monetary variables are likely to be closely monitored,” it added.
The Citigroup expects to see some moderation in export growth, to 10 percent during FY10 from an estimated 9.5 per cent during FY09.
“Factoring in import growth at over 9.0 percent year-on-year basis and healthy growth in remittances, this would result in the current account surplus coming in around 2.5 percent of GDP in FY10 against an estimated 1.7 percent in FY09, the report said.
“The taka is likely to assume a depreciating trend, to BDT 72.3 per US$ by the end of FY10 from the present level at BDT 69.1,” it added.
BBN/SS/SI/AD-27June09-11:52 pm (BST)