Bangladesh Economic Update, October 2012
Despite an unfavourable global economy, economic growth in Bangladesh is projected at close to 6 percent in fiscal 2013 (FY13). Adverse external demand and domestic supply constraints continue to be a drag on growth. Shortfalls in exports and inves...
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| Language: | English en_US |
| Published: |
Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/708261468207262384/Bangladesh-economic-update http://hdl.handle.net/10986/27068 |
| Summary: | Despite an unfavourable global economy,
economic growth in Bangladesh is projected at close to 6
percent in fiscal 2013 (FY13). Adverse external demand and
domestic supply constraints continue to be a drag on growth.
Shortfalls in exports and investments due to a possible
protracted crisis in the euro area and internal supply
constraints may underpin the moderation of growth.
Investment targets of the medium term budget framework 2013
to 2017 face major obstacles in shortage of electricity and
gas supplies, and poorly functioning roads and ports. One
positive prospect on the investment front is the increase in
foreign direct investment in FY12, which surpassed the US$ 1
billion for the second time in Bangladesh's history.
Fiscal policy is back on track. Fiscal performance in FY12
was favourable, notwithstanding increasing subsidies. The
overall budget deficit in FY12 is estimated at 4.5 percent
of Gross Domestic Product (GDP). Domestic financing of the
deficit declined to 3.2 percent of GDP, from 3.5 percent in
FY11. Lower government borrowing from the banking system in
the second half of FY12 was a welcome reversal from worrying
trends in the first half of the year. The FY13 budget
deficit target 5 percent of GDP is modest, though higher
than the estimated 4.5 percent of FY12, and is likely to be
undershot primarily because of a shortfall in the
implementation of the ambitious Tk 550 billion annual
development programs, by now a familiar pattern. However,
the financing of the deficit may be a challenge with a
projected US$2.2 billion net external financing need,
substantially more than the $1.4 billion of the revised FY12
budget. The rest of the deficit is projected to be financed
from domestic sources, with a still heavy 69 percent
reliance on bank borrowing. Bangladesh's economic
outlook is subject to several near-term risks. Possible
intensification of the euro area crisis may deepen
Bangladesh's export slump of the last six months;
escalation of global food prices may reverse the recent
decline in food inflation; global oil price shock will place
the balance of payments under pressure again and shrink
fiscal space; banks are susceptible to credit and market
risk and the global economic vulnerabilities; and increased
political instability and labour unrest may depress
investments further. |
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