London-based Economist Intelligence Unit (EIU) has projected Bangladesh’s economy will continue to grow at 6.5 percent during 2007-09 fiscal years, similar to that in 2006-07.
“The composition of growth in 2007/08 and 2008/09 will be similar to that in 2006/07, as record inflows of workers’ remittances underpin activity in the services sector and the manufacturing industry continues to make a positive contribution,” EIU said in an outlook released recently.

It said rates of growth in the agricultural sector, however, will continue to lag behind those in manufacturing and services in 2007/08, as the sector strives to overcome the devastation caused by the floods this year, which destroyed crops in more than one-half of Bangladesh’s 64 districts. “Assuming normal monsoon rains in 2008, the agricultural sector is expected to make a strong recovery during 2008/09.”

The economic growth is set to slow slightly from 6.5 percent in 2006/07 to 6.2 percent in 2007/08 as the agricultural sector tries to overcome the devastating effects of the recent floods.

The country report titled ‘Bangladesh at a glance: 2008-09’ said the main near-term risk to economic growth is inflation, which stood at a 10-year high in September.

“The fear is that high inflation could entrench itself, particularly since the central bank (unlike its counterparts in the region) has not tightened monetary policy and is unlikely to do in the near future,” it said.

It said there are also signs that domestic and foreign investments have weakened over recent months. Domestic investors have been reluctant to expand capacity, with many wary of attracting the attentions of the Anti-Corruption Commission (ACC), which appears determined to investigate all cases of unexplained wealth.

“This means that, unlike in the past, investments are being scrutinised by the ACC.”

The report said that Bangladesh’s external environment is likely to become slightly less favourable in 2008 as economic growth in the US and Euro area,Bangladesh’s largest export markets, remains sluggish.

The real GDP growth in the US, which absorbs around 24 percent of Bangladeshi exports, is forecast to increase slightly, to 2.1 percent, from an estimated 1.9 percent in 2007.

By contrast, economic growth in the euro area (the destination of more than 30 percent of Bangladeshi exports) is forecast to lose momentum, slowing from an estimated 2.5 percent in 2007 to 2.2 percent in 2008.