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GDP on the rise

Despite drawbacks in key sectors


Published : 13 Dec 2019 09:24 PM | Updated : 06 Sep 2020 09:13 PM

Despite infrastructure bottlenecks and shortage of power in industry, country's major macroeconomic indicators like the growth rate of GDP will be increasing in the following years, experts says. The quarterly review on economic situation, released by the Metropolitan Chamber of Commerce and Industries (MCCI) on Thursday, also saw the infrastructure bottlenecks and shortage of power and energy along with power supply disruption due to poor transmission and gas shortage generally prevent its performance at full capacity.

The review finds that country’s merchandise export earnings in the first quarter of the current financial year (Q1 of FY20) decreased by 2.95 per cent to US$9.65 billion from US$9.94 billion in the corresponding period of the previous fiscal year. Export earnings also fell short of the strategic target (US$10.85 billion) by 11.06 per cent.

During the quarter under review, exports of readymade garments (RMG) alone earned US$8.06 billion, or 83.52 per cent of total exports. The realized export earnings were, however, 1.59 per cent short of the export earnings of US$8.19 billion in the corresponding quarter of the previous fiscal year.

The inflow of remittances in the first three months of the current fiscal year (July-September of FY20) increased by 17.58 per cent to US$4.55 billion from US$3.87 billion in the corresponding period of the previous fiscal year. Disbursement of foreign aid decreased by US$56.05 million or 5.62 per cent to US$940.80 million in the first quarter of the current fiscal year (Q1 of FY20) compared to US$996.85 million in the corresponding period in the previous fiscal year. In the first two months of the present fiscal (July-August of FY20), the net foreign direct investment (FDI) increased by US$28 million or 7.0 per cent to US$428 million from US$400 million in the corresponding two months of FY19. FDI inflow in Bangladesh is low compared to that in many countries at similar level of development.

According to the review, the agriculture sector grew at a lower rate of 3.51 per cent in FY19 compared to 4.19 per cent in FY18. The lower growth of the sector was also accompanied by its falling share in GDP, which declined to 13.60 per cent in FY19 from 14.23 per cent in FY18.

The share of the industry sector in GDP increased by 1.48 percentat to 35.14 per cent in FY19 from 33.66 per cent in the previous fiscal year. The sector grew at 13.02 per cent in FY19 compared to 12.06 per cent in FY18. Within the industry sector, the manufacturing sub-sector grew at 14.73 per cent in FY19, which was 1.33 percentage points higher than the growth rate of 13.40 per cent during the previous fiscal year.

Total installed generation capacity rose to 19,428 megawatt (MW) in September 2019, which was 18,825 MW two months back (in July). Broad money (M2) recorded a higher growth of 10.89 per cent at the end of August 2019 compared to the 9.00 per cent growth achieved at the end of August 2018.

Domestic credit, on the other hand, grew by 13.47 per cent in the 12-month period ending in August 2019, as against the slightly lower credit growth of 13.23 per cent till the end of August 2018. The credit growth in August 2019 was also below the credit growth target of 14.50 per cent for December 2019 set in the monetary policy for the fiscal year 2019-20 (MPS, FY2019-20).

The interest rate spread in the banking sector fell marginally to 4.00 per cent at the end of August 2019 from 4.03 per cent in July 2019. The weighted average interest rate on deposits rose to 5.60 per cent in August 2019 from 5.56 per cent in July 2019, and the interest rate on lending also increased slightly to 9.60 per cent from 9.59 per cent.

Total SME loans by all banks and non-bank financial institutions (NBFIs) increased by 7.56 per cent to Tk.208,150 crore at the end of June 2019 from Tk.193,515 crore at the end of June 2018. The disbursement of agricultural credit and non-farm rural credit by all scheduled banks in the first quarter (July-September) of FY20 stood at Tk.3,555 crore, some 1.75 per cent higher than the corresponding quarter of FY19.

The country’s stocks markets continued to suffer mainly due to a confidence crisis during most of the time in the first quarter (Q1) of the current fiscal year (FY20).

The review suggests that between end-June of 2018 and end-September of 2019, the Taka remained unchanged at Tk.84.50 in terms of US dollar. Gross foreign exchange reserves stood at US$31.83 billion (with ACU liability of US$0.48 billion) as of end September 2019, compared to US$32.78 billion (with ACU liability of US$1.04 billion) as of end August 2019.

In September 2019, the general point to point inflation in the country rose by 0.05 percentage points to 5.54 per cent from 5.49 per cent in August 2019. Food price inflation rose marginally by 0.03 percentage points to 5.30 per cent in September 2019 from 5.27 per cent in the immediate past month of August but, year-on-year, food inflation fell by 0.12 percentage points from 5.42 per cent.