Daffodil International University

Faculties and Departments => Business Administration => Business & Entrepreneurship => Economics in Business => Topic started by: kamruzzaman.bba on May 14, 2019, 11:26:13 AM

Title: Bank graft biggest risk to economy
Post by: kamruzzaman.bba on May 14, 2019, 11:26:13 AM
The corruption-ridden banking sector is the biggest downside risk to the country’s economic growth, requiring the central bank’s vigilance so that discipline can be restored to the industry, said the MCCI yesterday.

There are other downside risks such as poor implementation of public investment programmes, exemplified by only 47.22 percent of the Annual Development Programme reportedly being implemented in the first nine months of the current fiscal year, it said.

The views came in the third quarterly economic review of the Metropolitan Chamber of Commerce and Industry (MCCI).

The country’s growing requirement for subsidy payments to different sectors, uncertainty in the availability of foreign aid, and growing income inequalities are some other impediments to the development, said the chamber.

“Inadequate infrastructure, a lack of investor confidence in the economy that discourages making fresh investment, and the shortage of power and energy are now major impediments to the country’s accelerated economic development.”

Power and gas shortages, insufficiency of investment and weak infrastructure were also major obstacles as they disrupted industrial production and discouraged new investment, according to the review.

Improvements in the country’s GDP growth so far are the outcome of steady progress in the agriculture sector and food security and moderately good growth in industry despite the shortage in the power sector, it said.

Bangladesh economy has achieved a lot of successes in recent times. As per an estimate of the Bangladesh Bureau of Statistics, the country’s GDP growth in the present fiscal year was likely to be 8.13 percent, up from 7.86 percent in the last fiscal year.

The review’s executive summary echoed that Bangladesh’s economy was progressing well albeit below its true potential.

“Despite the impediments to growth, however, the economy has done exceptionally well over the past two decades. Internationally accepted indicators of both economic and social progress have placed Bangladesh at the forefront of the developing world,” it read.

“Poverty has fallen and people’s living standard improved significantly,” the review said.

The agriculture sector performed well in the third quarter. The sector grew at a robust rate of 4.19 percent compared to a moderate growth of 2.97 percent in the previous one.

The power supply situation also improved but the demand too shot up.

Total installed capacity rose to 18,242 megawatts in April from 17,965MW in January, but production remained low because of gas shortages and maintenance-related shutdowns of some power stations.

Domestic credit, on the other hand, grew 13.74 percent in February this year whereas it was 14.22 percent in February in 2018.

The credit growth in February was also lower than the credit growth target of 15.90 percent set in the monetary policy for the second half of the present fiscal year.

In the July-February period of 2018-19, net foreign direct investment (FDI) increased by 24.79 percent to $1.183 billion from $948 million in the corresponding eight months of the previous fiscal year.

In comparison, the net inflow of the FDI in 2018 increased by 67.91 percent to $3.61 billion from $2.15 billion in the previous year.

“The amount is still very low in terms of the country’s development needs. It is also low compared to the FDI inflow to many countries at a similar level of development,” the review said.

Overall, trade deficit narrowed by 8.43 percent in July-February of FY19, thanks to a steady growth of exports and a slowdown in imports.

The deficit in trade in services, too, shrank year-on-year by 0.94 percent in the same period. Lower trade and service deficit led to a significant improvement in the current account balance during July-February of FY19.

The current account deficit narrowed to $4.27 billion during the period under review from $5.899 billion in the corresponding period of the previous fiscal.

The financial account surplus has, however, shrunk by 30.75 percent from $5.376 billion to $3.723 billion during this period, despite an increasing trend in the net FDI.

Due to a significant improvement in the current account balance, the deficit in the overall balance improved to $499 million in July-February of FY19 from a deficit of $978 million during the corresponding months of FY18.