Bangladesh Economic Update, January 2015
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.