The New Nation - Internet Edition

Staff Reporter

The effect of cyclone Sidr and two phases of flood may increase poverty rate by 1.2 per cent and inflation by 1.07 to 1.23 per cent this year, revealed socio-economic research organisation Shamunnay.

At the publication ceremony of Bangladesh Economic Outlook-2 yesterday at the National Press Club it also forecast that this year's Gross Domestic Product (GDP) growth may fall by 0.68 to 0.80 per cent compared to the previous year due to the loss in rice production.

Executive Editor of the Bangladesh Economic Outlook Selim Raihan said this year the GDP growth may stand between 5.70 and 5.82 per cent.

Shamunnay estimated that due to the two-phase floods and cyclone Sidr, rice production may fall by nearly 24 lakh tonnes.

It said business confidence has declined largely during the current quarter compared to the previous quarter despite recent government steps to ensure a better business environment in the country.

It, however, indicated that the confidence is likely to improve a bit during the next quarter (January-March). The government has formed Bangladesh Better Business Forum (BBBF) and Regulatory Reforms Commission (RRC) in its efforts to ensure a better business climate in the country.

Shamunnay also projected a slowdown in economic growth during the current fiscal year compared to the previous fiscal and found that the country is becoming more dependent on food import and marginal people more vulnerable to rising food inflation.

Dr Atiur described investment slowdown as the most important cause behind the slow economic growth and found poor business confidence causing investors to shy away. He said the businessmen were suffering from a sense of serious uncertainty about their investment decision due to increased cost of doing business as well as declining profits during October-December period of 2007 than the last quarter.

"The economy is well exposed to count the price of their (businessmen's) indecision," he told the meeting, adding that the sluggish economy is unlikely to overcome easily unless the political uncertainty removes quickly.

He said the investors always take their investment decisions in line with government economic and political policies, but it seemed at this present unstable situation that "different types of policy instructions were coming from different sides of the government."

He added that the investors were struggling to get coordinated and rational instructions while remained very much uncertain about the future political and economic policy trends.

The study conducted a survey on 150 business enterprises to look into five confidence indicators - financial condition or profitability, investment situation, employment situation, business cost and sales or export orders.

It found that almost all the indicators showed declining trend during the current quarter, barring sales or export orders, particularly RMG exports, that remained above the benchmark level.

Business confidence index (BCI) showed that all businesses but readymade garments, pharmaceuticals and financial institutions were suffering from lack of confidence while all businesses pointed out that the cost of doing business has increased during the period.