Banking sector biggest downside risk to economy, says MCCI

Dhaka-based preeminent trade body MCCI has termed the country's banking sector the biggest downside risk to the economy.

"The corruption-ridden banking sector is perhaps the biggest downside risk now," said the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) in its quarterly economic review released on Thursday.

The review for the period of January-March of the fiscal year (FY) 2017-18 also called for strict vigilance by the central bank to bring discipline in the sector.

The MCCI voiced concern over the growing income inequality in the country.

"An alarming increase in income inequalities between the rich and the poor is witnessed," it said.

The MCCI suggested combating the growing income inequality, the government has to develop more safety net programmes for the poor.

The chamber urged the government to reform the existing banking system, which it said was largely responsible for creating inequality in the country.

It highlighted the downside risks to the economy disrupts industrial production and discourages new investments. The rate of inflation is expected to rise to nearly 6.0 per cent this month because of the holy Ramadan, the MCCI said.

The rate of inflation is expected to rise to 5.98 per cent in May because of the Ramadan, according to the review.

The chamber said that the major macroeconomic indicators such as exports, imports, remittances and foreign exchange reserves are expected to increase, thanks to the peaceful political situation, which "will continue in the coming days."

"Power and gas shortage and weak infrastructure are the major obstacles to growth," it said.

On export receipts, the MCCI said the year-on-year shipment dropped by 1.36 per cent to $ 3.05 billion, which is also below the government's strategic target of $ 3.15 billion.

Export declined due to the poor performance of non-RMG products, including leather and leather products, plastic products and engineering products. It suggested expanding the net exports through the diversification of products and markets.

The government launched a new project "export diversification and competiveness development project (tier-2)" meant for promoting high-end fashion, garments, active pharmaceuticals ingredients, processing foods and jute products.

While analysing the import trend, the chamber body said the import rose by over 26 per cent to $ 33.84 billion in the past eight months to February on the back of higher procurement of fuel oil, food items and capital machinery.

But the local currency weakened, making imports costlier. Between June 2017 and March 2018, Taka depreciated by 2.93 per cent against the US dollars.

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