US bank upbeat about Bangladesh's economy

Sun Online Desk

29th July, 2015 08:41:31 printer

US bank upbeat about Bangladesh's economy

The US-based Citibank NA in its latest half yearly economic update was optimistic about the country's macroeconomic situation and investment prospects while it listed the significant progress that the major economic indicators showed last year.


In the update, released on Wednesday, the bank expressed its confidence that the country would achieve higher economic growth in the coming days, saying that the government's recent steps were in the right direction, BSS reports.


The global bank's regular update, which comes twice a year and are circulated among its clients, media, economists and a select group of business people, is considered carefully by the entrepreneurs for making investment in the respective country.


"The economy witnessed improvement in capacity utilization and investments were showing some signs of recovery," it said, referring to the constant growth in agriculture, industrial and service sectors.


Observing that the GDP (gross domestic product) growth was sturdy in the immediate past 2014-15 financial year (FY15) despite political discord, the bank said Bangladesh could attain 7.0 percent GDP growth, set for the current 2015-16 financial year (FY16) through facilitating and expediting investment.


The Citibank, which has been operating in Bangladesh for years providing necessary services to the corporate clients, noted that the investment to GDP ratio should rise by another 2.0-2.5 percentage points from its current 26.0 percent to increase economic growth to 7.0 percent. Last year, the GDP growth was 6.51 percent.


In the update, Citi recognized that the government's measures to boost investment through developing economic zones and ports, bringing in necessary policy and regulation changes and recent announcement to merge the Privatization Commission and Board of Investment were all in the right direction.


"However, ensuring durable political stability, trade liberalisation and efficient implementation of energy and communication infrastructure investments remain the preconditions for Bangladesh's accelerated, inclusive, and sustainable growth", the bank said.


The macroeconomic factors including inflation, trade, remittance, reserve, exchange rates and liquidity in the banking sector remained favourable to expedite the prospect of trade and investment, the update noted.


It said the 6.51 percent GDP growth in the last fiscal year was a commendable achievement when the inflation came down to 6.40 percent, below the fiscal target of 6.50 percent.


The bank, however, cautioned that the new pay-scale for government workers would put upward pressure on prices when rice production and fuel prices in the international market would be key determinants in maintaining low inflation rate.


The update pointed out that current account balance slipped into negative territory, but the export started picking up due to the apparel retailers' reinstatement of confidence in Bangladeshi garments industry after positive notes on workers safety standards by two foreign inspections agencies Accord and Alliance.


As the government set $33.50 billion export target for FY16, the Citi said the primary challenge to attain the target lies in export diversification strategy both geographically and in terms of concentration.


So, it recommended necessary steps to enhance regional trade with South Asian and ASEAN countries besides broadening the export basket, focusing more on the potential of the pharmaceutical industry and software to take up the baton from the garments industry.


It said the remittance inflow remained robust last as migrant workers sent home $15.31 billion when the reserve crossed $25 billion mark.


"Active management of the exchange rate of the local currency against US dollars by Central Bank also contributed to increased remittance inflow in the country," it said, advising measures for exploring new markets for manpower exports and developing workers' skills by providing them the necessary technical education and training.


Referring to excess liquidity, the bank said that the government's target of borrowing Taka 38,500 crore from banks "is expected to emerge as a relief for the banking sector".