WB forecasts GDP at 5.8 pc

The government might be expecting a 6.3 percent GDP growth this fiscal during its last year of its tenure, but the World Bank is not so optimistic.

It says Bangladesh's annual GDP growth this fiscal will not exceed 5.8 percent.

In its Global Economic Prospects (GEP) report released Thursday, the Washinton-based global lender said Bangladesh's annual GDP growth will not cross the 5.8 percent -- a projection it made for the 2012-13 fiscal as well.

Thursday’s GEP report said the GDP growth for the 2011-12 came down at 6.2 percent due to ‘weak’ external demand, ‘undependable’ power policy coupled with obstacles to internal supply of goods and political turmoil.

Similar factors will drag down the GDP growth to much below the government's expectations, the GEP report indicated.

"During 2010-12 Bangladesh saw speedy growth . That alongwith rising global prices and expansionary microeconomic policies pushed up inflation. Later the economy shranks, internal barriers and the political unrest caused the growth forecast to be lowered for 2012-13."

It's on this same premise that the World Bank expects GDP growth to be within 5.8 percent for Bangladesh this fiscal as well.

Bangladesh's current 2013-14 budget aims at 7.2 percent GDP growth.

Earlier an Asian Development Bank (ADB) forecast said Bangladesh's GDP growth will not go beyond 5.7 percent.

Like before, Finance Minister AMA Muhith has brushed away these forecasts and told Parliament that GDP growth this fiscal will hover between 6.3 and 6.8 percent.

The World Bank has however revised its GDP growth forecast for 2013-14 and 2014-15 at 6.1 percent and 6.3 percent respectively -- higher than the current fiscal but lower than earlier projections.

"However, a booming economy is possible because of lack in infrastructure (power, roads) and some internal weaknesses and social and political unrest."

Also, the government expenditure is expected to rise due to the elections this year. That will add to inflation, says the World Bank.

It fears that if a different party comes to power, it might not go ahead with the reforms initiated by the present government.

The report shows that industrial production rose 21.3 percent after January. Because of the GSP in European Union and the US, the export of Bangladesh increased. On the other hand, a healthy flow of remittance helped achieve a positive balance of payments.

World Bank reports said export increased due to a growing demand for Bangladeshi garments. However, recent accidents have raised labour safety issues which might affect garment exports.

The monetary policy was relaxed during the first half of the fiscal because of control on inflation , which the World Bank says will contribute to growth. However, a upward-moving customer price index (CPI) might push up inflation.

The report said that despite a downturn in the European economy, the risk factor for developed countries has receded and growth was gaining.

However, the growth of the developing countries will be affected by the diminishing capability of middle-income countries.

The World Bank forecast put the growth of global economy at 2.2 percent this year, 3 percent in 2014 and 3.3 percent in 2015.

For South Asian countries, the growth in 2013 will be 5.2 percent, for 2014 it will be 6 percent and 6.4 percent in 2015.

Owing to a fall in India's GDP growth, slow growth in Bangladesh and Sri Lanka, and the stagnation in growth for Pakistan and Nepal, the growth dipped to 4.8 percent in 2012, the report said. However, for a rise in internal demand and a momentum in investment, growth will rise in the coming years.