The New Nation - Internet Edition

THE World Bank has projected Bangladesh's economic growth at 5.5 per cent for the current year - lower than domestic estimates due to what it says 'political tensions, severe flooding and cyclone'. Releasing its 'Global Economic Prospects (GEP) 2008' recently, the World Bank pointed out that rising inflation, potential threat to exports, increase in the food and energy prices and pressure on external balance would have an 'adverse impact on the economy'. South Asia's regional GDP, according to the GEP, was vibrant at 8.4 per cent in 2007 easing only moderately from the 8.8 per cent outturn of 2006. The regional growth is expected to pick up to 8.1 per cent by 2009 as recovering growth in the Organisation for Economic Cooperation and Development (OECD) firms up external demand and as receding oil prices ease pressures on the import bill. In the global context, the World Bank has projected the growth to be 3.3 per cent in 2008.

The Bangladesh Bank governor has rejected the World Bank's projection of economic growth and said the economy would grow at 6 to 6.2 per cent in the current fiscal year. The governor expressed the hope that inflation which hit record high of 11.21 per cent in November on point-to-point, would come down to a range of 8 to 8.2 per cent on an average. In the first half of the fiscal year, the economy was confronted with twin floods in the August-September period and a severe cyclone Sidr in November, apart from soaring food prices often attributed to the global commodity market volatility. The central bank's half-yearly monetary policy has planned steps to help the economy overcome the shocks of the first half and see a higher growth with more employment and income generation in the second.

Heightened political tensions and severe flooding were curbing demand in the second half of 2007and will contribute to a full percentage point reduction in growth to 5.5 per cent for 2008, said the World Bank outlook. It said tighter domestic credit conditions induced a softening in investment growth, while net exports turned negative, explaining the slight moderation in growth from 6.6 per cent in 2006 to 6.5 per cent in 2007. According to media reports, sharp gains in international food prices are a growing threat in a region where food imports represent 11-20 per cent of total imports. Food imports represent 19 per cent of Bangladesh's total imports. In this context, the GEP projected that the reserves and other buffers that developing countries have built up over the years may be needed to absorb unexpected shocks. Apart from putting increased pressure on external positions, the World Bank report said higher international food prices carry potentially serious implications for the poorest members of these societies, including Bangladesh. Higher food prices could strain government coffers and generate increased inflationary pressures given widespread food subsidies. Similarly, further increases in energy prices remain a risk for the region, which is highly dependent on oil imports.