The central bank has projected that inflation rate will rise by 1.3 percentage point in the current fiscal year compared to that of last year due to the rise in prices of food and non-food items in the global market. However, the central bank predicts that the GDP growth rate will stay over 6.0 percent, though many quarters have anticipated it would be lower than that.

The Bangladesh Bank makes these views in its Monetary Policy Review released yesterday.

In the review it says, “The projections of food and non-food inflation lead to a prediction of 12-month average general CPI inflation in FY 08 in the range of 8.10 percent and 8.50 percent vis-à-vis the end FY07 CPI inflation rate of 7.20 percent.”

The central bank also says the current projection indicates that international prices of most of the commodities, especially those of rice, wheat, edible oil, and other essential commodities that Bangladesh imports, are not likely to come down in 2007-08.

It further says Bangladesh has a high food weight in total consumers price index (CPI), which makes domestic inflation highly susceptible to food price changes in the international commodity market.

The review adds: “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 would return to normalcy early in FY 08.”

The 12-month average food inflation is likely to lie in the range of 9.30 percent and 9.70 percent and 9.75 percent to 10.15 percent respectively in rural and urban areas, the review adds.

The projections suggest that the national 12-month average food inflation in 2007-08 fiscal year would settle in the range of 9.75 percent and 9.85 percent.

The review also predicts that the 12-month average non-food inflation is likely to be in the range of 6.35 percent to 6.75 percent and 5.50 percent to 5.90 percent respectively in the rural and urban areas.

The projections also imply that the national 12-month average non-food inflation in 2007-08 fiscal year would settle in the range of 6.10 percent to 6.50 percent.

The GDP growth rate for the current fiscal year would be in the range of 6.2 percent to 6.5 percent, the review predicts.

However, the International Monetary Fund (IMF) predicated that the GDP growth rate in the current fiscal year would be posted at 5.5 percent, while the Asian Development Bank (ADB) said it would be below 6.0 percent during this period.

“The recently initiated policy strategies and reform programmes would create brighter prospects of growth enabling the country to achieve the targeted growth in FY 08,” the review observes.

It further says, “The economy’s growth momentum would generally be sustained during FY 08 although there is likely to be some moderation in growth in agriculture, industry, and services sectors.

“Based on the assessment of the current situation and analysis of sub-sectoral growth rates, this review projects the growth for the agriculture sector to lie in the 2.6 percent and 3.0 percent range whereas the likely growth in the industry sector would be in the range of 8.5 percent to 9.0 percent in FY 08.

“The services sector would sustain its earlier growth performance and would yield a growth rate of 6.3 percent to 6.5 percent in FY08.”