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Major Economic Challenges: A Pre-Budget Analysis

Bangladesh Economic Update, May 2015 

MEU May 2015The current issue of Bangladesh Economic Update identifies ten major economic challenges causing shortfall in growth in gross domestic product (GDP) vis-à-vis target, slack private investment, and shortfall in collection of revenue vis-à-vis target. The Update presents a thorough scrutiny of the challenges that the economy has undergone during FY 2014-15 and should take into consideration while declaring the budget for FY2015-16. The Update, however, also presents a critical analysis of the trends of selected economic indicators with respect to three overarching policy issues – expansion of productive capacity, effective provision of social services to the citizens, and sustainable development – that must be taken account of before setting off for the formulation of national budget 2015-16. Finally, the Update attempts to develop an institutional reform measure that specifying the functions and responsibilities of the administrative structure of current fiscal management would confirm the effectiveness of economic management in the country through enhanced capabilities and greater accountability of responsible authorities. The target of rate of growth in GDP has been being set over seven percent in recent years, whereas the actual has been sticking to around six percent. The slow rate of growth in GDP can however be ascribed to mainly three issues – stagnant private investment, shortfall in revenue collection and low implementation of ADP along with lack of infrastructural developments.

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Expenditure on Social Sector vis-à-vis Public Spending: An Assessment

Bangladesh Economic Update, March 2015 

MEU March 2015The current issue of Bangladesh Economic Update aims at assessing the trend of public spending in connection with the allocations for social development – improvement in education, health, social security and welfare, and housing. The Update finds that on the one hand public spending assumes an increasing trend in Bangladesh, but yet the country lags far behind other developing countries in accumulating the public spending up to the mark in order to expedite economic growth and accelerate the declining rate of poverty. On the other hand, allocations of public spending for social sectors as percentage of the total programme spending have recently undergone decreasing trends signaling inadequate investments in social development and posing challenges to the formation of human capital in the country. The Update puts particular emphasis on the necessity of an effective fiscal management system that would help the government increase public spending and thus channel adequate resources to such sectors as education, health, social security and welfare, and housing, thereby ensuring the provision of public services and facilitating the formation of human capital in Bangladesh.

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Balance of Trade

Bangladesh Economic Update October 2013 

october-meu-13The current Bangladesh Economic Update focuses on the current situation of trade. It further concentrates on factors and policies that have been exerting pressure on the external sector.

The country has been experiencing a negative balance of trade over the years, despite a fall in trade deficit. The reason behind this decline in trade deficit has been a greater decrease in import than that in export. Trade deficit declined from USD 9310 million in FY 2011-12 to USD 7010 million in FY 2012-13, after increasing over the years to reach at peak in FY 2011-12. Trade deficit as a percentage of GDP reached at 8.10 percentage of GDP in FY 2006-07, the highest between FY 2001-02 and FY 2012-13.

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Revenue Collection: Recent Trends & Challenges

Bangladesh Economic Update, February 2015 

MEU February 2015The current issue of the Bangladesh Economic Update attempts to assess the state of revenue collection against the backdrop of the running prolonged political stalemate, continuous shortfall in revenue collection from its target for several fiscal years, and its consequential impact on public investment. The Update also examines the contribution of different sources to the total collection of revenue and analyses the pattern of expenditure, the deficit trend and deficit financing. The biggest challenge in revenue mobilisation this year will be the fulfillment of the target of revenue under the existing political unrest. The economy already has passed half of its way of the current fiscal year but the revenue collection is much lower than its target and already has fallen short of its target. The historical data shows that in the year of election the rate of growth in revenue collection falls due to stagnant economic activities arisen from political violence and turbulence. The current continuous countrywide blockade coupled with the several hartals over a month is hampering economic activities badly. Export to different countries has started to fall; small and medium enterprises are incurring losses; bank credit is falling, and sluggishness in investment in private sector is ongoing. Revenue has fallen short of its target in previous two consecutive years where economic situation was comparatively good. So, considering the historical trend, it can be predicted that the shortfall will be large which will affect the trajectory of growth of the economy.

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Monetary Policy Statement (January-June, FY2014-15): A Rapid Assessment

Bangladesh Economic Update, January 2015 

MEU January 201 jpeg

The current issue of the Bangladesh Economic Update focuses on the recently announced half-yearly Monetary Policy Statement (MPS) for the period of January-June of FY 2014-15 by the central Bank, Bangladesh Bank (BB). The Update examines the current MPS in the background of three major economic issues affecting the growth of the economy – sluggishness in investment due to inflation targeting policy formulation and current political uncertainty, crisis in banking sector due to increase in default loan, and huge capital flight due to slack surveillance and oversight. Following the scrutiny, the Update reveals that the growth in private sector credit may fall short of target in view of the observed trend of unachieved targets in previous occasions. It has,however, been cautioned that this trend of shortfall in targets of growth in private sector credit may further worsen the sluggish rate of private investment triggered by current political uncertainty, and cause the rate of growth in gross domestic product (GDP) not to reach the target of 7.3 percent in FY2014-15. Till November of FY2014-15 when the political unrest did not reach the current level, the BB remained far away from its target of 14 percent growth in private sector credit set for the period of July-December of FY2014-15. It is, therefore, argued that the target of 15.5 percent for the January-June period of FY2014-15 seems to be unrealistic amidst the current state of severe political uncertainty since January 2015.

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