Bangladesh Economy: Present Conditions, Monetary Policy, Outlook for Investment and Growth

he steady, stable growth performance of Bangladesh over years amid repeated episodes of natural calamities and external shocks has provided markets and entrepreneurs a predictable policy environment of low uncertainty. Following a couple of years in global crisis related mild slowdown, economic activities have rebounded in fiscal year (FY) 11 with strong (above 40 per cent) growth in both exports and imports. Provisional Bangladesh Bureau of Statistics (BBS) estimate reports 6.7 per cent real GDP growth for FY 11 (July 10-June11), following 5.7 and 6.1 per cent respectively of FY 09 & FY 10. The severe power supply shortages impeding output activities eased significantly in FY 11, enabling utilization of idle installed capacities. Benign climate and timely support measures yielded good growth in agricultural output. Given the palpable pace in growth momentum, the final estimate for FY 11 real GDP growth may touch 7.0 per cent; and the growth rate is projected to rise to 8.0 per cent per annum (pa) by FY 15. Growth path of per capita gross national income or GNI (estimated at USD 818 for FY 11) is on course to reach the middle income country group threshold (USD 996) by FY 15 or earlier.

Bangladesh has consistently pursued a cautious, prudent stance in monetary and fiscal policies, with fiscal deficits below four per cent of gross domestic product (GDP) in recent years. The government's modest revenue base (in GDP percentage) is widening steadily with ongoing reforms in revenue administration; rising to 12.1 in FY 11 from 11.5 of FY 10.The country's medium term macroeconomic framework targets this to reach 14.6 per cent by FY 15.

Bangladesh economy was not impacted severely by the recent global financial crisis and economic downturn, owing to its limited, regulated external exposure. While being a World Trade Organisation (WTO) member since its inception with open trade regime and full current account convertibility of Taka, Bangladesh maintains some capital...