The Financial Express

MCCI wants removal of factors impeding development

| Updated: October 24, 2017 16:39:05

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Country's economy to be 30th largest in five yrs, in PPP terms

Bangladesh's gross domestic product (GDP) now stands at US$686.59 billion in terms of purchasing power parity (PPP), making it the 32nd largest economy in the world in 2017.

Bangladesh's GDP, in terms of PPP, is expected to cross $1,000 billion, making the country the 30th largest economy of the world in 2022.

The Review of Economic Situation in Bangladesh for April-June 2017 (Q4 of FY17), prepared by the Metropolitan Chamber of Commerce and Industry (MCCI), included the estimate.

The leading chamber mentioned the size of the Bangladesh's GDP on the basis of the World Economic Outlook of the IMF (International Monetary Fund), released in April, 2017.

However, in nominal terms, the size of the GDP will turn Bangladesh into the 38th largest economy in 2022. The GDP of the country is now the 45th largest.

The MCCI said remittance inflow in the last financial year up to June 30 was the lowest in six years, declining by 14.48 per cent to US$12.769 billion from US$14.931 billion in the previous fiscal year.

It said the decline in remittance was indirectly linked to the fall in prices of petroleum products in the global market.

While analysing the banking sector, the chamber noted that banks increased their lending rates after a long pause due to an increased credit demand from the businessmen in the last few months.

"Interest rates on bank lending increased to 9.66 per cent in May 2017 from 9.62 per cent in April 2017," it noted.

However, the weighted average interest rate on deposits decreased to 4.93 per cent in May 2017 from 4.97 per cent in April this year.

The overall interest rate spread stood at 4.73 per cent in May 2017, compared to 4.65 per cent in the previous month (April), the MCCI said.

It said total liquid assets of scheduled banks increased by 0.96 per cent and stood higher at Tk.2.647 trillion as of end-May, 2017.

The minimum required liquid asset of the scheduled banks was Tk.1.615 trillion as of end-May, 2017, it said.

The disbursement of industrial term loans during January-March period of FY17 stood at 19.4 per cent lower at Tk.157.83 billion compared to Tk.195.75 billion during the immediate previous quarter (October-December) of FY17.

The recovery of industrial term loans increased by 6.3 per cent during this period.

On deficiency in major infrastructures, the MCCI said: "Inadequate infrastructure, lack of investors' confidence in the economy that discourages making fresh investments and shortage of power and energy are now major impediments to the country's development."

It said these impediments must be removed to restore the confidence of the country's business and investor community.

The power supply situation improved in the quarter under review but the demand for power too shot up.

"Unofficial estimates put the current demand for electricity at around 10,000 megawatt (MW), while the maximum generation in 2017 was 9,479 MW (as of June 7)," it said.

In July, 2017, total installed capacity rose to 13,179 MW, but production remained low because of gas shortage and also because of closure of some power stations for maintenance.

The MCCI said export earnings in FY17 grew by only 1.69 per cent to US$34.835 billion from US$34.257 billion in the previous fiscal year.

Export earnings were also 5.85 per cent short of the strategic target at US$37 billion.

"The slow growth in apparel exports was mainly responsible for the failure to meet the target," it noted.

Import payments (C&F) in the first 11 months (July-May) of FY17 rose by 10.69 per cent to US$43.508 billion from US$39.307 billion in the corresponding period of the previous fiscal.

It said import payments increased mainly due to higher imports of capital machinery.

The disbursement of foreign aid in FY17 fell by 12.32 per cent to US$3.56 billion from US$4.06 billion in the previous fiscal year.

"The disbursement declined mainly due to slower project execution and lower fund disbursement by a few development partners, including Japan," it observed.

On the other hand, the commitments of foreign aid increased to a record high of US$17.86 billion in FY17, 153.33 per cent higher than that of the corresponding period of the previous fiscal year (US$7.05 billion).

The increase was mainly due to the single largest US$11.36 billion state credit commitment by the Russian government for the Rooppur nuclear power plant project.

In July-May period of FY17, the net FDI inflow was US$1.625 billion, which was 27.75 per cent higher than the FDI inflow in the corresponding period of FY16.  

Between end-June of 2016 and 2017, the Taka depreciated by 2.80 per cent in terms of US dollar.

In June, 2017, the general point-to-point inflation increased by 0.18 percentage point to 5.94 per cent from 5.76 per cent in the previous month due to an increase in prices of some food and essential items.

The food inflation increased by 0.14 percentage point to 7.51 per cent in June 2017 from 7.37 per cent in the immediate past month (May).

At the same time, non-food inflation too increased by 0.23 percentage point to 3.67 per cent in June 2017 from 3.44 per cent in the previous month.

A comparison of inflation data for urban and rural areas showed that the inflation rate in June of FY17 was higher in urban areas than in rural areas.

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