The Bangladesh Bank (BB) has predicted that the country’s growth momentum will generally be sustained during the current fiscal (FY08) notwithstanding the fact that there will be a negative sign in growth of agriculture, industry and services sectors.

“….Projection for GDP (gross domestic product) growth for FY08 is in the range of 6.2 per cent to 6.5 per cent. The recently initiated policy strategies and reform programmes would create brighter prospects of growth enabling the country to achieve the targeted growth in FY08,” the central bank said in its Monetary Policy Review (October 2007), released Monday.

Based on development until the first quarter of FY08, the Monetary Policy Review (MPR) provided forecast of GDP growth and inflation rate during the current fiscal.

The central bank has been announcing the monetary policy stance through half-yearly Monetary Policy Statement (MPS) since January 2006. The fourth MPS was announced in July last covering the first of FY08.

The growth in agriculture sector will be in range between 2.6 per cent and 3.0 per cent range where the likely growth in the industry sector would be in the range of 8.5 per cent to 9.0 per cent in FY08, according to the MPR.

“This review anticipates that the services sector would sustain its earlier growth performance and would yield a growth rate of 6.3 per cent to 6.5 per cent in FY08,” it added.

The MPR also predicted that the 12-month average food inflation would likely to be in the range of 9.30 per cent to 9.70 per cent and 9.75 per cent to 10.15 per cent respectively in rural and urban areas.

The projections suggested that the national 12-month average food inflation in FY08 would settle in the range between 9.75 per cent and 9.85 per cent.

The 12-month average non-food inflation is likely to be in the range of 6.35 per cent to 6.75 per cent and 5.50 per cent to 5.90 per cent respectively in the rural and urban areas, the MPR said.

These projections implied that the national 12-month average non-food inflation in FY08 would settle in the range of 6.10 per cent to 6.50 per cent.

“…Projections of food and non-food inflation lead to a predication of 12-month average general CPI (consumer price index) inflation in FY08 in the range of 8.10 per cent and 8.50 per cent vis-a-vis the end of FY07 CPI inflation,” the MPR added.

With rationalisation of the enforcement regime and other measures taken by the government to increase production and supply of essential commodities after the temporary disruption in the supply chain in FY 07, it is more likely that the supply situation will return to normalcy early in FY 08.

The MPR said the prices of most of food and non-food items have been rising in the global market, especially those of rice, wheat, edible oil, crude oil and other essential items.

“The current projection indicates that the international prices of most of the commodities that Bangladesh imports are not likely to come down in FY 08,” it said adding moreover, Bangladesh has a high food weight in total consumer price index (CPI), which makes domestic inflation highly susceptible to food price changes in the international commodity market.

“It is prudent, therefore, for the present monetary policy in Bangladesh to focus on a policy stance that is supportive of robust output growth to ease domestic supply constraints and ensure price stability,” it said.