Bangladesh's GDP growth in fiscal year 2005 is estimated at 5.4 percent, lower than 6.3 percent in the preceding year, mainly due to serious flooding, the Asian Development Bank (ADB) said in Dhaka Sunday.

According to the June 2005 issue of ADB's Quarterly Economic Update for Bangladesh released at an ADB press briefing here on Sunday, the country's overall economic performance remained positive with a steady expansion in the industry and services sectors despite the adverse impact of the July-September 2004 floods across the country.

Agriculture sector suffered a setback in FY2005 (July 2004-June 2005) due to the floods. Overall agriculture growth during FY2005 is estimated at only 0.3 percent, down from 4.1 percent in FY2004.

Offsetting the weak performance in the agriculture sector was a steady expansion in the industry and services sectors.

Overall growth in the industrial sector during FY2005 is estimated at 8.6 percent, one percentage point higher than 7.6 percent in the previous fiscal, primarily due to steady growth in export-oriented manufacturing supported by strong growth in the construction and utilities sub-sectors. The service sector registered steady improvement due to strong growth in foreign trade and manufacturing. Overall growth of the sector during FY2005 is estimated at 6.6 percent compared with 5.7 percent in the preceding year.

However, the Quarterly Economic Update said an increase in oil prices threatens the balance of payments. The monetary policy stance remains expansionary and the exchange rate came under pressure. Inflation edged up due to higher food prices and an increase in international prices. Export grew by 15 percent during July-May of FY2005 over the corresponding period of the previous year, while year-on-year imports grew 26.6 percent during the first 10 months of FY2005.

Oil import bills in FY2005 increased by 54 percent over the previous fiscal. The incremental cost (around 550 million US dollars) due to oil price increases reduced foreign exchange available for other essential imports and put pressure on reserves and the exchange rate.

On a year-on-year basis, monetary development increased by 16.3 percent in May 2005 compared with 13.3 percent in May 2004, while the rising trend in inflation continues with point-to-point inflation reaching 6.9 percent in May 2005.

The exchange rate experienced increased pressures and exhibited significant volatility due mainly to the rapid growth in imports. This resulted in the taka depreciating by about 5 percent between December 2004 and June 2005, the ADB said.

Source: Xinhua