Unnayan Onneshan, an independent multidisciplinary think-tank, projected that the real rate of growth in GDP in the current fiscal year may decline to 5.65 percent.
The research organization in its current issue of the Bangladesh Economic Update on Monetary Policy Statement (MPS) said the falling private sector credit growth will continue to suppress investment demand, resulting in decline in rate growth in gross domestic product (GDP).
The UO, however, states that the growth in GDP may fall below the decadal average of six percent due to fiscal and monetary management trap, functioned by lack of policy farsightedness and political contestations.
Moreover, it observe that reduction in investment and growth for the successive three years from those of the preceding ones, on the one hand, and the increase in inflation on the other may cause pressure on the macroeconomic stability of the country.
Urging for a new policy approach, the think-tank said: “Recent declining trend in private sector credit growth, which has factually been causing the growth of the economy to decline in the last three years in a row, can be restrained through a harmonisation of fiscal and monetary policy.”
It also observed that the slow demand for investment has been reflected in the credit deposit ratio. The overall credit-deposit ratio in the banking sector decreased to 70.80 percent in December 2013 from 71.91 percent in November 2013. The credit-deposit ratio was 76.59 percent in December 2012 and 80.33 percent June 2012.
As regards the credit growth in real sector, the organisation states that the disbursement of industrial term loan stood at Tk. 8880.79 crore in the first quarter of the current FY 2013-14, which is the lowest among the last five quarters, whereas it was Tk. 9720.3 crore in the first quarter of the previous FY 2012-13.
Referring to the SME loan, the organisation notes that state owned banks observed a negative growth of 38.47 percent at the end of September 2013 compared to September 2012.
In FY 2010-11, the GDP growth rate was 6.71 percent, which declined to 6.23 percent in FY 2011-12, and further fell to 6.03 percent in FY 2012-13.
Source: UNBConnect