State of the Bangladesh Economy in FY2007-08 (Second Interim)

Author: 
Mustafizur Rahman et al
Description: 
Centre for Policy Dialogue Paper 67
JEL codes: 
Abstract: 
Fiscal year 2008 started its journey in the backdrop of the moderately high growth rate of 6.51 per cent achieved in FY2007. Experience of FY2007 was unique in the history of Bangladesh in the sense that it saw three consecutive governments and declaration of a state of emergency. The new caretaker governments (CTGs) first six months coincided with the second half of FY2007. Despite the challenging scenario, political turmoil and disruption in the economy in the early months of FY2007 (particularly in November- December, 2006) and the uncertainties afflicting the economy during the period following the takeover by the current CTG in January 2007, FY2007 saw a number of positive developments. These included moderately high growth of manufacturing industries (10.01 per cent), robust performance of the export sector (15.69 per cent growth), revitalized capital market (121 per cent growth in DSE market-capitalisation) and high growth of remittance flow (24.5 per cent). However, some disturbing signs were already discernible as FY2007 was drawing to a close: a deteriorating trade balance, weak implementation of public investment programmes, stagnating food grains production and a fall in agricultural credit disbursement. Creeping inflation throughout the year, particularly, rising prices of cereals and fuel originating from increasing world prices of cereals and oil, was already emerging as causes for concern. The wide ranging anticorruption drive added to uncertainties affecting investment environment with consequent negative implications for domestic and foreign investment.