Dhaka, Bangladesh (BBN)-U.S.-based Citigroup has identified three concerns on inflation front in Bangladesh, but a higher agricultural growth could help keep the average inflation within 6.5 percent in this fiscal.
Three concerns are pay scale revisions for government employees, an upward trend in development spending under annual development program during the second half of this fiscal and pressure on food prices particularly rice.
“However, assuming no disruption to agricultural output, we expect trends to average 6.5 percent during fiscal 2009-10 (FY10) from a 6.7 per cent average in FY 09,” the Citigroup said in a report released on Friday from Mumbai, India.
Apart from agriculture production, export trends need a close watch, the report added.
Production for the ‘Boro’ rice crop will help determine agricultural output. A shortfall would result in price pressures. Export growth -particularly textile -is also below target, but stimulus measures, announced in November 2009, could support trends, the report said.
Boro rice production, which comprises 55 percent of food gain production, will play an important role in determining agricultural growth, according to the report.
The Bangladesh Bank (BB), the country’s central bank, in its monetary policy, released on Tuesday, projected a further rise in the country’s Consumers Price Index (CPI) inflation on point-to-point basis in the coming months of this fiscal.
However, the central bank expressed the hope that the 12-month average CPI would be within the budgetary target by the end of FY10.
The country’s CPI inflation increased slightly to 6.71 percent on a point-to-point basis in October 2009 from 4.60 per cent in September because of the rise in prices of both food and non-food items.
Accordingly, the 12-month average CPI inflation instead of declining would creep up in the second half of this fiscal. But it is expected to remain within 6.5 percent range by the end of FY10, as projected by the BB in line with the budgetary announcement earlier.
The Citigroup also sees that the country’s overall economy will grow at a rate of 5.7 percent in FY10 from 5.9 percent in FY09.
Finance Minister AMA Muhith in his budget speech, delivered on June 11 this year in parliament, projected the growth between 5.5 percent and 6.0 percent in FY10.
“Trends in industrial production are erratic, but a line of credit from India to support infrastructure is in the pipeline, which bodes well for industrial growth,” the report noted.
BBN/SS/SI/AD-24January10-1:35 am (BST)
