BDEconomicUpdateOct2010

BDEconomicUpdateOct2010 - October,2010 Bangladesh...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
October, 2010 Economic Policy and Poverty, and Finance and Private Sector Team South Asia Region The World Bank Bangladesh Economic Update
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1 Bangladesh Economic Update October 2010 Summary Bangladesh is estimated to have grown at a healthy rate in FY10, despite the slow global recovery and severe power shortages . Much of this growth (revised estimates put it at 5.8 percent) came from the services and industrial sectors, driven by growth in consumption fueled by strong remittance inflows, especially in the first part of the year. In FY10, inflation rose to 7.3 percent, up from 6.7 percent in FY09, driven mainly by rising food prices. In particular, prices of rice rose because of shortages in domestic production and rising prices in India. Monetary growth remained high in FY10, driven by strong growth in credit to the private sector and continued accumulation of net foreign assets by the Bangladesh Bank. On the external side, exports weakened compared to FY09 and remittances slowed towards the end of the fiscal year because of global economic conditions. Domestic power shortages also interrupted the production of readymade garments. Foreign exchange reserves rose to a level equivalent to 5.5 months of imports. Overall, fiscal prudence was maintained in FY10, with the fiscal deficit remaining at around 4 percent of GDP. Reforms progressed in FY10, despite some setbacks . The ongoing and prospective changes in tax policy and administration could be critical for Bangladesh’s growth prospects. There has also been progress in reducing structural constraints to investment. There was improvement in the institutional framework for facilitating public and private investments (Special Economic Zones Act, Public-Private Partnership guidelines, Bangladesh Infrastructure Finance Fund). Regulatory reforms in the capital market came as a firefighting response while, in areas of core governance, there were setbacks (amendments to the Telecommunication Act and proposed amendments to the Anti-Corruption Commission Act). GDP growth is projected to be 6.1-6.3 percent in FY11 . This estimate emanates largely from higher public and private investment. However, there are several downside risks to growth in FY11. A weaker than anticipated global recovery could dampen the recovery in exports and further slow down remittances. Meanwhile, on the domestic front, continued power shortages could choke growth. The downside risks may dominate the upside potential. Recognizing the importance of reliable power for industrial growth, the government has contracted domestic and foreign private power producers . This involves a trade off. While providing power would help sustain growth (electricity shortages in Bangladesh have a significant impact on production and therefore growth), it also imposes additional fiscal costs.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern