Warning sounds overslow ADPWB report foresees sluggishgrowth ahead, stresses economicreforms

The World Bank has warned that
Bangladesh's GDP growth and
poverty reduction rate may slow
further in the current fiscal year
because of sluggish exports,
remittance inflow and investment
amid global recession.
Against this backdrop, the WB in
an economic update said the
first priority is to expedite
implementation of annual
development programme (ADP)
and economic reforms to cope
with the situation.
The report -- Bangladesh
Country Economic Update -- was
released yesterday at a press
conference at the WB Dhaka
office.
"In the short term the best
thing the government can do is
to really implement its
development programme --
that's the no 1 priority," said
Sanjay Kathuria, lead economist
for Bangladesh, while releasing
the report.
Kathuria also said the impression
is that the pace of economic
reforms has been quite slow in
the last few months. "If we can
start by getting back on the
track, accelerating these
reforms is needed to help boost
business optimism," he said.
WB acting Country Director
Robert L Floyd said Bangladesh
would get over $3 billion
between FY2010 and FY2013
under the next country
assistance strategy of the donor
agency.
The country got $2.69 billion
during FY2006-FY2009 under the
assistance strategy.
The report predicted that the
GDP (gross domestic product)
growth rate might be 5.5
percent in the current fiscal
year.
It also said the rate could be as
high as 6 percent if a sustained
global recovery leads to strong
export and if the performance
of energy sector improves.
The GDP growth was 5.9 percent
in the last fiscal year, a slight
drop from the 6.2 percent
growth achieved in FY2008.
The report, however, warned
that the growth might slow
further in FY2010, pointing to
slower growth in exports and
remittances in the second half of
FY2009 and a mixed private
investment outlook.
Private consumption, accounting
for around 75 percent of GDP,
may also decline because of
lower agricultural and remittance
growth. The investment rate has
remained flat in recent years
due to growing infrastructure
constrains and high interest
rates.
The report predicted that the
impact of the global financial
crisis on poverty would be more
significant in 2010 than in 2009.
"Prior to the crisis, Bangladesh
was on target to cut poverty by
nearly 11 percentage points
between 2005 and 2010. With
the impact of the crisis, the
poverty rate is now projected
to fall by about 9 percentage
points. This translates to around
2.4 million additional poor in
2010," the report said.
The estimated impact is also
uneven in different regions of
the country, with more
industrialised and integrated
regions (Dhaka, Chittagong and
Sylhet divisions) likely to
affected more by the crisis.
The report applauded the
improvements in Bangladesh's
debt indicators in the period
between FY2002 and FY2009,
which were due among other
things to fiscal adjustments and
rising GDP growth.
It said sustaining these
improvements would require
stronger efforts to mobilise
domestic revenues as well as a
higher quality of expenditure,
especially on the ADP.
"Also, slow ADP implementation
can hurt both growth and
poverty reduction."
The report warned that
inflationary pressure may
reemerge if the liquidity
overhang in the banking system
continues and international
commodity prices rise.
Senior Economist at WB
Bangladesh office Zahid Hossain
said the country suffered less in
the global economic crisis
compared to other countries. He
said investment has been almost
stagnant for the last three
years. One of the main causes is
high interest rate, and weak
infrastructure, especially in gas
and power sectors.
He said there has not been
remarkable improvement in public
investment in gas and power
sectors for the last several
years. ADP allocation in these
sectors should be increased, he
suggested.
SH