Daffodil International University
Faculties and Departments => Business Administration => Business & Entrepreneurship => BBA Discussion Forum => Topic started by: Rozina Akter on September 25, 2013, 01:18:42 PM
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The Bangladesh Bank has identified three challenges to reducing the inflation as envisaged in the target for the current fiscal year (FY) 2013-14, shown in the national budget at 7.0 per cent.
"Both the old and new inflation base-data indicate that inflation remains a key challenge to the country's economy," Bangladesh Bank (BB) said in its latest quarterly report, released Monday.
The first challenge, as identified by BB, is the likely wage increases in both the public and private sectors, which will create aggregate demand pressure," according to the report.
"The FY `14 budget includes a sizeable provision for a public sector wage hike, and in the private sector the wage board for the garment industry has been set up which will in turn have implications for the rest of the economy," the central bank said in its Bangladesh Bank Quarterly (BBQ) for April-June, 2013.
Another challenge, food inflation in particular, stems from possible supply-side disruptions if prolonged nationwide strikes take place; and as in all years, there are risks coming from weather-related factors affecting agricultural yields, according to the BB.
Finally, the recent rise in Indian inflation could also be transmitted to Bangladesh as shown by the historical long-term trends, the BBQ added.
The central bank has estimated the gross domestic product (GDP) growth at 6.03 per cent in FY `13, lower than 6.23 per cent growth of FY `12 and the 6.2 per cent average for the previous decade.
"Slower growth in agriculture and services sector contributed to slower GDP growth," it explained.
Looking ahead to FY `14, BB's current forecast is that output growth is unlikely to deviate significantly from the last ten-year average of 6.2 per cent. "This is based on current and projected trends of a number of variables including global growth, domestic and foreign investment, exports, imports, remittances etc," the central bank explained.
The BBQ also said the central bank would update its forecasts on a regular basis during the course of FY `14.
"It's our own projection, which has been estimated considering the country's overall socio-economic situation," a BB senior official told the FE Tuesday without elaborating.
Average inflation, using the 1995/96 base-year, has been declining steadily over the past fifteen months, from a peak of 10.96 per cent in February 2012 to 7.70 per cent in June 2013, according to Bangladesh Bureau of Statistics (BBS).
"This decline was driven by a steady fall in point-to-point food and non-food inflation until October 2012, when food inflation bottomed out at 5.57 per cent," the BBQ said, adding since then food inflation had begun to rise and in June 2013 it was 8.53 per cent.
Non-food inflation fell from a peak of 13.96 per cent in March 2012 to 6.79 per cent a year later, the BBS data showed.
However, point-to-point non-food inflation has increased to 6.99 per cent in June 2013. Point-to-point inflation data, using the 2005/06 base, broadly shows similar trend as the pattern using the 1995/96 base, although the absolute numbers differ, the central bank said.
Using the 2005/06 base, point-to-point food inflation has risen from 1.75 per cent in September 2012 to 8.26 per cent in June 2013. Point-to-point non-food inflation is steadily declining, having peaked in October 2012 at 11.28 per cent to 7.75 per cent in June 2013.
The BBQ also said the rise in food inflation was pushing up average inflation, which bottomed out at 6.06 per cent in January 2013 and rose to 6.78 per cent in June 2013.
Source:The Financial Express
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