Country Report Bangladesh July 2000 Updater

Economic forecast: Economic growth

The economy has largely recovered from the floods in 1998. Three successive bumper harvests, in fiscal years 1998/99-1999/2000, have led to a revival of the agricultural sector, but manufacturing sector growth has remained weak. Industrial growth will increase, but will remain below the rates of the early 1990s, hindered by the deteriorating political situation and the slowdown in economic reform. The banking sector will remain in the doldrums, state-owned enterprises will remain loss-making and corruption and excessive bureaucracy will continue to drag down the economy. External balances and foreign-exchange reserves will remain fragile.

The government has estimated GDP growth at 5.5% in fiscal year 1999/2000 (year ending June 30th), from an earlier projection of 6.4%. The government's forecast that GDP growth for 2000/01 will be 6.2% is also likely to be revised downwards as the fiscal year progresses. The EIU forecasts GDP growth of only 5.2% in 2000/01. Following a number of good harvests, we forecast agricultural growth of just over 4%. Despite its problems, some rebound in the industrial sector is probable and we forecast an expansion of 6.4%, and in exports of 10% in 2000/01. The sector has largely restocked after the floods of 1998, and industrial growth should return towards its previous trend-rate. Poor infrastructure and inefficient resource allocation will continue to act as major obstacles to increasing the rate of growth.

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