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Performance of the Economy During the First Half of FY 2006-07

Performance of the Economy During the First Half of FY 2006-07. By Prof. Ayubur Rahman Bhuyan. Organized by Islamic Economic Research Bureau. 1. Seminar Highlights. Performance of the Economy during the First Half of Fiscal 2006-07 (FY07)

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Performance of the Economy During the First Half of FY 2006-07

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  1. Performance of the Economy During the First Half of FY 2006-07 By Prof. Ayubur Rahman Bhuyan Organized by Islamic Economic Research Bureau

  2. 1. Seminar Highlights • Performance of the Economy during the First Half of Fiscal 2006-07 (FY07) • Economic Indicators, viz, GDP, Real Sector production, Public Finance, Financial Sector developments, External Sector Performance etc. • Opinions expressed are the Presenter’s own and do not in any way represent the views of the IERB

  3. 2. Some Positive features of the Economy • Macroeconomic fundamentals are strong • Buoyant external demand gave a boost to export • Steady growth of worker remittances • Inflation is slightly high but under control • Exchange Rate relatively stable • Foreign Exchange Reserves appear comfortable

  4. 3. Some Negative Features • Revenue shortfall despite progress in Tax Administration Reform • Reforms (e.g. financial sector reform, energy pricing etc.) have slowed down. • SOE losses growing • Weak governance (Economic, Institutional, Political) persists • Poor ADP Implementation • Poverty is declining very slowly • FDI is declining • Political tension and infrastructural constraints vitiate the investment climate

  5. The Real Sectors 4. Agriculture: Food Production (in Metric tons) • Target for FY07: Aus 2.02, Aman 12.21, Boro 15.52, Wheat 0.77, Total 30.52 • Aus, the first crop, produced 1.51 MMT, which is 14% lower than last year’s production of 1.75 MMT, and 25% short of this year’s target • Harvest of Aman, the second crop, is new complete. It was affected by scantly rainfall, and short supply and high prices of fertilizer and insecticide • Aman production this year was 10.6 MMT, less than last year’s production of 10.8 MMT

  6. 5. Agriculture Contd. • Boro crop will depend on timely availability of fertilizer and irrigation water (dependant on diesel and electricity supply) • Shortfall of fertilizer is feared because of delayed import • Boro production may be les than target • Wheat crop: the reduced target may be achieved • Outlook for minor crops (maize, pulses vegetables) is promising • However, agriculture sector growth may be less than last year’s 4.5% • Total production target of foodgrains for FY2006-07 has been recently refixed at 32.27 MMT 5.7% higher than the earlier target of 30.52 MMT

  7. 6. Agriculture Contd. Food grain production (Million MT)

  8. 7. Industry • In July-November 2006, large and medium scale industries grew by 12% over the same period of last year • Output of small industry in the first quarter of FY07 registered 11.4% growth • No improvement in electricity production is likely in the near term • Power disruption, restrictive credit policy, and infrastructural problems may impede industrial growth • Overall prospect: Growth may be slightly lower than in FY06

  9. 8. Services Sector • In the first half of FY07, the services sector responded well to the growth of manufacturing industry and higher volumes of export and import • However, hotel and restaurant business was affected badly by the power crisis • Political programmes of parties affected transport and communication, and the entertainment industry • Overall prospect: If business climate improves, the sector may perform well

  10. 9. GDP • Growth in FY06 was 6.7%, riding on higher growth in agriculture and industry • This year, agriculture sector growth may be lower than the last year may be around 3.3% • Condition for industrial growth are favourable (there are new capacities in RMG, Textile, Engineering and Chemicals sectors) • The services sector may record strong growth

  11. 10. GDP Contd. • But major impediments to higher industrial growth now are: • Infrastructural constraints (power, gas, road, ports) • Labour unrest (as seen in the garments sector) • Political uncertainty • Other risks: Instability in world prices, tough competition following MFA phase-out • Overall GDP growth may be lower this year than last year’s 6.7%, but still remain around 6% • Various growth projections: ADB 6.0%, IMF 6-6.5%, BB 6.5-7.1% • To sustain higher GDP growth, the country needs to improve infrastructure, meet the growing energy demand • All this will require substantial investment and faster progress with reforms

  12. 10. Growth of GDP and Sectors (%) [At Constant FY96 Prices]

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