Growth Performance
Bangladesh's
GDP growth rate of 6.0 percent in FY13 using the 1995-96 base, and 6.2 percent
using the 2005-06 base, remain impressive. Growth in agriculture sector
declined from 3.1 percent in FY12 to 2.2 percent in FY13. Growth in crops and
horticulture sub-sector slid to 0.2 percent in FY13 from 2.0 percent in FY12,
though growth in animal farming and forest and related services subsectors
increased slightly during the period. Fishing sub-sector grew above 5.0 percent
in FY13.
Industry
sector grew slightly more at 9.0 percent in FY13 compared to 8.9 percent in
FY12 driven in large part by faster growth in mining and quarrying,
construction and small scale industries (Table 1.2). Mining and quarrying
sub-sectors grew strongly by 11.1 percent in FY13 compared with 7.8 percent in
FY12. Power, gas and water supply subsector demonstrated a lower growth of 8.6
percent in FY13 compared with 12.0 percent in FY12; however, the growth in FY13
remained above the long run trend.
Services
sector growth decreased to 5.7 percent in FY13 from 6.0 percent in FY12
affected mainly by lower growth of wholesale and retail trade sub-sector.
Wholesale and retail trade sub-sector, the major services sub-sector, declined
to 4.7 percent in FY13 from 5.6 percent in FY12 reflecting weaker domestic
demand. Growth rates of hotel and restaurants, transport, storage and
communication, real estate, renting and other business activities, community,
social and personal services subsectors increased slightly in FY13. On the
other hand, growth rates of financial intermediation, public administration
defense, health and social works sub-sectors edged down during the period.
Education subsector grew strongly from 7.2 percent in FY12 to 9.7 percent in
FY13.
Savings and Investment
Gross fixed
investment increased slightly to 26.8 percent of GDP in FY13 from 26.5 percent
in FY12 due to increasing growth of public investment (Chart 1.1). During the
same period, private investment decreased from 20.0 to 19.0 percent of GDP and
public investment increased from 6.5 to 7.9 percent of GDP. National savings
rates increased slightly from 29.2 percent of GDP in FY12 to 29.5 percent of
GDP in FY13. Domestic savings as a percent of GDP remained unchanged at 19.3
percent in FY13. The domestic savings-investment gap as a percentage of GDP,
correspondingly, increased from 7.2 percent in FY12 to 7.5 percent in FY13.
Price
developments
The average
inflation rate, using the FY06 new base, moderated to 6.8 percent at the end of
FY13 from 8.7 percent at the end of FY12. Over this period, food and non-food
inflation both decreased from 7.7 to 5.2 percent and from 10.2 to 9.2 percent
respectively. The decrease in average inflation during FY13 was driven mainly
by a gradual fall of food inflation until January 2013 when food inflation
bottomed out at 3.2 percent. A steady decline in non-food inflation during the
second half of FY13 also contributed to fall in average inflation. Though
average inflation went down, point-to-point
inflation increased to 8.1 percent in FY13 from 5.6 percent in FY12.
Money and Credit Developments
In FY13,
Bangladesh Bank designed its monetary policy stance based on assessment of
global and domestic macroeconomic conditions and outlook. BB continued
restrained policy stance in H1 of FY13 to curb inflation. In H2 of FY13 repo
and reverse repo rates were decreased from 7.75 and 5.75 percent in FY12 to
7.25 and 5.25 percent respectively in FY13. Besides, Bangladesh Bank continued
to maintain the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio
(SLR) for banks at 6.0 percent and 19.0 percent respectively.
Public Finance
Excluding
grants, the overall budget deficit to GDP ratio increased from 4.1 percent in
FY12 to 4.8 percent in FY13. However, domestic financing of the deficit
decreased to 3.1 percent of GDP in FY13 from 3.3 percent of GDP in FY12.
External Sector
The exports
earnings increased to USD 26566 million from USD 23989 million and import
payments increased marginally to USD 33576 million from USD 33309 million in
FY13 over FY12. Trade deficit declined to USD 7010 million in FY13 from USD
9320 million in FY12. The services and income account including primary income
and secondary income registered a surplus of USD 9535 million due to a buoyant
increasing remittance
inflows.
Remittance inflows increased to USD 14338 million in FY13 from USD 12734
million in FY12. As a result, current account balance moved to a surplus of USD
2525 million as compared to a deficit of USD 447 million in FY12. The capital
and financial account surplus continued to increase from USD 1918 million in
FY12 to USD 3367 million in FY13, primarily due to increased flow of FDI,
medium and long term loan disbursements and net trade credit. The capital
account surplus increased from USD 482
million to USD 588 million during this period. While taking into account net
errors and omissions, the overall balance of payments registered a huge surplus
of USD 5128 million in FY13 compared to a surplus of USD 494 million in FY12.
Gross international foreign exchange reserves at USD 15300 million at end of
FY13 reflected improved external balances, representing 5.5 months of import
cover.1.21 The export earnings, expressed as a percent of GDP, decreased from
20.7 percent in FY12 to 20.5 percent in FY13. The growth rate of exports
earnings increased from 6.2 percent to 10.7 percent during this period. While
leather, jute goods, knitwear and woven garments experienced a positive growth,
some of the exports items like fish, shrimps, raw jute, tea, home textile and
engineering products experienced a negative growth. Import payments, as a
percent of GDP, decreased from 28.7 in FY12 to 25.9 in FY13. Imports grew at a
rate of 0.8 percent in FY13 compared to the 2.4 percent growth in FY12. This
lower growth of import payments resulted mainly from negative growth in imports
of food grains, edible oil, sugar, POL, fertiliser, and capital machinery.
However, imports of pulses, chemicals, textile & textile articles thereof
and iron, steel & other base metals showed positive growth in FY13. The
rate of growth of workers' remittance inflows increased by 12.6 percent in FY13
playing an important role in strengthening the current account balance. In
order to achieve BB's monetary policy goal and to avoid undue volatility in the
foreign exchange market, Bangladesh Bank remained vigilant by closely
monitoring the exchange rate movements, and buying and selling of foreign
exchanges. In FY13, Bangladesh Taka experienced appreciation of
5.2 percent against US dollar mainly due to
strong growth in the flow of inward remittances, increase in export earnings
and sluggish import payments. BB purchased USD 4539.0 million in order to mop
up excess liquidity in the local foreign exchange market. The nominal exchange
rate of Taka stood at Taka 77.77 per US dollar as of end June 2013 compared to
Taka 81.82 per US dollar as of end June 2012. In nominal effective terms,
against a trade weighted eight currency basket (base: 2000-01=100), Taka
appreciated by 6.4 percent in FY13. The real
effective exchange rate of the Taka also
appreciated by 11.3 percent as of end June 2013.