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Wednesday, October 26, 2011

BD Economic Update Fall 2011, World Bank

The World Bank publishes it regular 'Bangladesh Economic Update Fall 2011'. 

Here is the link of the update.

Major points:

·         Real GDP grew at 6.7 percent in FY 2011, continuing the upward trend in growth.
·        Inflation is high and volatile, with the year-on-year rate reaching 12 percent in September 2011. This is the highest recorded since FY99. Rising international commodity prices were the main source of food price increases. The growing gap between domestic demand and domestic production appears to have contributed to the rise in non-food inflation that was concentrated in non-energy items.
·      Risks in the global economy can affect Bangladesh in several ways. If the slowdown occurs, it can affect Bangladesh’s balance of payments through its impact on exports and remittances, put pressure on the exchange rate, increase economic uncertainty, and, in turn, weaken investment and growth.
·     Domestic policies will also affect Bangladesh’s economic prospects. A slow pace of reforms in the investment climate can affect domestic and foreign investment, as can inadequacies in energy supply and the poor quality of other infrastructure. The reversal of trade reforms as well as weakening of the financial sector can also affect export growth and investment. Expansionary macroeconomic policies could increase risks on the current account and make inflation management more difficult.
·       Unlike in 2008, Bangladesh has less policy space to cushion the impact of a second global slowdown through fiscal stimulus packages and monetary easing. Rapid growth in subsidies, sustained high rate of growth of credit to the private sector as well as recourse to monetary financing of the fiscal deficit have led to the erosion of the fiscal and monetary policy space.
·         However, maintaining the enabling environment to allow a repeat of the growth performance in FY12 will be a challenging task considering the growing downside risks.
Off the track: Interestingly, the cover page of the update incorporates a photo of broken roads in the country, clearly reflecting the recent focus of the World Bank. 

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