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Monetary Policy Statement (January-June, FY 2016-17): A Rapid Assessment

Monthly Bangladesh Economic Update, January 2017

January 2017

The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its rapid assessment of recently announced monetary policy statement for the second half of the FY 2016-2017 reveals that declining growth in private sector credit resulting in stagnant private investment and consequential unemployment especially of youth is likely to challenge the efficacy of monetary policy strategies.

The UO in its January issue of Bangladesh Economic Update 2017 cautions that without increasing the quality, mere growth in private sector credit by the targeted level – 16.5% for the second half of the current fiscal year – may prove ineffective in boosting private investment and achieving the target of growth in gross domestic product (GDP).

The think tank points out that private investment has remained stagnant and stood at 22.07 percent of GDP in FY 2014-15 and 21.78 percent in FY 2015-16, while increase in public investment from 6.82 percent in FY 2014-15 to 7.6 percent in FY 2015-16 has not succeed to create much needed crowding in for private investment.

 

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Year-end Assessment of Bangladesh Economy: Trends and Challenges

Bangladesh Economic Update - Year-end Review 2016

December 2016 YearEnd

The Unnayan Onneshan (UO), an independent multidisciplinary think tank, in its year-end assessment of the economy reveals that medium-term macroeconomic challenges in the forms of stagnation in ratio of private investment to gross domestic product, deceleration in rate of growth in collection of revenue, high concentration of single product in export basket and lower inflow of remittance, coupled with high youth unemployment loom large.

“The causes of elapsing prospects are more institutional. The gradual corrosion of institutions has constrained allocation of resources to channel efficiently into the productive sectors in order for the economy to get higher returns in terms of expanded productive capacity,” observes the last issue of the UO’s monthly Bangladesh Economic Update.

The Unnayan Onneshan notes that the stagnation in the ratio of private investment to gross domestic product (GDP) and ever increasing rise of capital flight, coupled with regulatory unpredictability in economic management have appeared to be the major challenge in the economy.

 

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Recent Trends in the Accounts of Balance of Payment

MONTHLY Bangladesh Economic Update, December 2016

December 2016

The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its monthly publication of the ‘Bangladesh Economic Update’ December 2016 reveals increased trade deficit and resultant negative current account balance coupled with negative growth in inflow of remittance is likely to exert pressure on country’s balance of payment.

Referring to the most recent data published by the central bank, the research organization shows that trade deficit increased by 12.52 percent to 2777 million USD in July-October 2016 from 2468 million USD in July-October, 2015 since export increased by 6.78 percent whereas import increased by 7.93 percent during July-October 2016.

The other three components of current account balance – services, primary income and secondary income – also exhibit declining trends, notes the think tank. The balance of services further declined from negative 865 million USD in July-October 2015 to negative 1036 million USD during the corresponding period of the current fiscal year.

 

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Revenue Mobilisation: Trends and Challenges

MONTHLY Bangladesh Economic Update, October 2016

October 2016

The Unnayan Onneshan (UO), an independent multidisciplinary think tank, in its monthly publication of Bangladesh Economic Update October 2016 reveals that decline in the rate of growth in total revenue collection in recent times together with an extant of low tax-gross domestic product (GDP) ratio is likely to slow financing for development.

The research organization finds that the rate of growth in revenue mobilization has declined since FY 2011-12. Actual mobilization of total revenue grew by 19.3 percent in FY 2011-12, whereas the rate of growth decline in the subsequent years and stood at 15.2 percent, 10.4 percent, 13.5 percent, and 13.8 percent in FY 2012-13, FY 2013-14, FY 2014-15, and FY 2015-16 respectively.

Furthermore, it is estimated that Bangladesh has the potential to increase the mobilization of its revenue up to 22 percent of gross domestic product (GDP) whereas the total revenue mobilization as percentage of GDP stood at 10.89 percent, 11.65 percent, 11.66 percent, 10.78 percent, and 10.26 percent in FY 2011-12, FY 2012-13, FY 2013-14, FY 2014-15 and FY 2015-16 respectively.

 

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External Sector: Recent Trends and Challenges

MONTHLY Bangladesh Economic Update, August 2016

August 2016

The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its monthly publication of the ‘Bangladesh Economic Update’ August 2016 reveals negative growth in two major external sector indicators - export shipment and wage earner’s remittance - in the starting month of FY 2016-17 compared to that of FY 2015-16 coupled with low business confidence is likely to exert pressure on country’s external sector balance.

In addition, recent declining growth in inflow of foreign direct investment (FDI) along with lack of expansion of productive capacity particularly in the manufacturing sector may adversely impact the overall performance of the country’s external sector, fears the research organizations.

Increasing export concentration of readymade garments (RMG) (from 83.9 percent in January-March 2015 to 84.6 percent in the corresponding period of 2016) together with declining growth in export earnings from RMG during the last couple of months, non-diversification of export markets, and lack of export competitive products may pose challenge to the performance of external sector, comments the UO.

 

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