Bangladesh Economic Update

Growth, Tax, Inflation and Consumers

The current update investigates the nature of the growth and tax and subsidy policies relating to real sectors such as agriculture and industry, in the backdrop of the passage of the National Budget for the financial year 2010-2011. This is important as the current government aspires to secure 8 per cent growth rate by 2013. An analysis on the nature of growth is warranted since the jump for growth from 4 per cent to 6 per cent required almost two decades, while the current government wants to achieve another two percent spike within the span of five years. The update also provides an analysis on the price movements in view of the forthcoming month of Ramadan. In this scrutiny, efforts are made to build scenarios on the pressures of prices, based upon data of five years. This also leads to have understanding on the future inflationary pressure, a challenge the country currently facing.

Full Report

Balancing the Imbalances

A Pre- Budget Analysis of the State of the Economy 2009-10

The government is at a crossroad to strike balance, through budgetary policies and allocation, between meeting the targets it had set out in the election manifesto, for which it was voted to power and the multiple challenges it is currently confronting on the economic front. The inherited investment slump, inflationary pressure, and short supply of energy from the previous interim government have not been abated. Export sector, which is mostly readymade garment, has fetched a negative growth. The much-vaunted lack of institutional and administrative capacity and the rent-seeking behaviour of certain sections have impeded public investment, including low implementation of annual development program. The government has continued to seek refuge to domestic borrowing. Besides the above, with the prevailing gap in the demand and supply of resources and the lagged impact of the global crisis, the government has to adopt countervailing policies for the economy to enhance productive capacity and welfare measures to augment growth, decrease unemployment, and reduce reversal of reduction in poverty.

Monthly Economic Update, March, 2010

Implication of Non-Economic Factors on Macro Economic Indicators

The performance of various macro economic variables in Bangladesh has been setback due to the prevailing capacity constraint that exists within the institutions. The level of aggregate investment in the economy has not been limited by resource constraint rather it was lack of incentive for investment. The capital mobility of the economy has been negatively affected by factors such as political variables, infrastructural constraint, international financial linkages and fiscal policy coordination. These factors have contributed to the reluctance of entrepreneurs to invest and it has also hindered the potentiality of foreign direct investment in the economy. These non-economic factors have also affected the implementation of the development programmes in the course of time. For achieving a sustainable growth rate, savings must be translated into investment by removing infrastructural constraints, corruption and political variables in the tax administration which are frequently faced by the entrepreneurs and negatively affect investment decisions. Good governance with little rent- seeking options and a combination and monetary and fiscal policy is required to crowd- in investment in the economy. Reforms in the financial institutions are crucial for a growth characterized by equity and justice.