Economy to rebound on remittance, private sector: Bangladesh Bank

Riding on surged remittance and private sector growth, Bangladesh's economy will promptly bounce back cushioning the virus fallouts in the current fiscal year, the Bangladesh Bank projects.

In a report titled "Monetary Policy Review December 2020" on Wednesday, the central bank explained that streaming remittances will help increase domestic demand, which will pave the way for attaining the economic growth target of 7.4% set for the fiscal 2020-21.

On top of this, the report said, the private sector credit growth is likely to improve in the coming months favoured by the government's stimulus packages and the central bank's reduction of policy rates.

For the current financial year, private sector credit growth was estimated to be 14.8%. However, considering the impacts of the pandemic, the growth target was lowered to 11.5% in December. As of November, private sector credit growth was only 8.21%.

"Private sector credit growth rebounded but increased slowly because of banks' cautiousness towards quality lending as well as investors' stickiness to survival strategies during the Covid-19 period instead of expanding their businesses," the report said.

The government's stimulus packages along with the restoration of business confidence may boost up public and private investment, said the report. 

However, the central bank warned of inflation since a lot of "easy money" has been pumped into the economy in the form of low-cost refinancing lines of credit along with the government's stimulus packages.

The central bank will keep a watchful eye on any such developments and will act accordingly to take the required policy action.

Besides, an advanced stage of vaccine development would have a positive impact on the global as well as domestic economy.  

The report said as global economies are opening up, export in readymade garments and remittance inflows are likely to bounce back in the near term as expatriate workers started to join their work, reflecting employment generation in the economy.

Moreover, foreign direct investment inflows are expected to grow by resuming different development projects, including continued collaboration with partner countries for investing in Bangladesh's transportation, energy and electricity, telecommunications, and other fields.

"The industrial sector has staged a magnificent turnaround from the pandemic deadlock with faster-than-expected growth of Quantum Index of Industrial Production (QIIP) at 7.94% in the first quarter of the current fiscal year," it said.

It said inflation might rise.

Adequate liquidity in the banking sector, fixing interest rates and demand being lower than the normal period led to a fall in interest rates. The central bank thinks this has reduced business costs of new entrepreneurs.

In the first half of the current financial year, the monetary exchange policy rate was stable as the central bank had bought dollars equivalent to Tk44,867 crore from the market.

The report said the capital market had turned around as a result of various steps taken by the central bank, and this trend would continue in the coming months.

Global trade may grow by 8.3% this year. Although the rise in oil prices will have some effect, non-fuel commodity prices will show a downward trend, which will have a positive impact on the economy of Bangladesh.