Trends in the Real economy

2.1

Output in agriculture, industry and services sectors

Agriculture sector 2.1.1 According to provisional estimates of Bangladesh Bureau of Statistics (BBS), the agricultural

sector attained a 4.67 percent growth in FY10 which was higher than 4.12 percent actual growth recorded in FY09. The agriculture and forestry subsector recorded 4.87 percent growth, of which crop and horticulture 5.13 percent, animal farming 3.32 percent, and forest and related services 5.63 percent in FY10 over the previous fiscal year. The fishing subsector registered a 3.98 percent growth in FY10 compared to 4.16 percent growth of FY09. The contribution of agriculture sector to GDP at constant price is estimated at 20.24 percent in FY10 which is lower than the actual contribution of this sector to GDP at 20.48 percent in FY09 (Table2.1.1). Table 2.1.1: Sub-sectoral growth and share in GDP of agriculture sector output Sectoral/sub-sectoral growth rate FY07 4.56 4.69 4.43 FY08 3.20 2.93 2.67 FY09 4.12 4.10 4.02 FY10(r) 4.67 4.87 5.13 3.32 5.63 3.98 (in percent) Sectoral or sub-sectoral share in GDP FY07 FY08 FY09 FY10(r) 21.37 20.83 20.48 20.24 16.64 16.18 15.91 15.75 12.00 11.64 11.43 11.34 2.88 1.76 4.73 2.79 1.75 4.65 2.73 1.75 4.58 2.66 1.74 4.49

Agriculture sector Agriculture and forestry Crop and horticulture

Animal farming 5.49 2.44 3.48 Forest and related service 5.24 5.47 5.69 Fishing 4.07 4.18 4.16 Source: BBS. r denotes revised estimate of BBS. Crop production trends 2.1.2

Trends of major crops production in Bangladesh are reported in Table 2.1.2. In terms of

quantity, the dominance of boro, aman, potato and vegetables in crop production continued in FY11. The four crops comprise more than 75 percent of total crop production. The estimated total non cereal crop output, 44 percent in total agricultural output, increased in FY11 over the actual production of FY10.

14

Table 2.1.2: Cropwise agricultural production (In lac metric tons)

Actual production for FY06 17.50 108.10 139.80 7.40 6.68 279.48 8.31 41.6 87.45 0.89 1.25 0.14 4.00 34.90 8.09 186.63 466.11 Actual production for FY07 15.12 108.40 149.60 7.37 8.41 288.9 8.85 52.76 93.05 0.84 1.30 0.13 3.63 35.67 8.99 205.22 494.12 Actual production for FY08 15.07 96.62 177.62 8.44 12.86 310.61 8.32 66.48 59.20 1.21 1.12 0.10 5.52 49.83 14.12 205.90 516.51 Actual production for FY09 18.94 116.13 178.09 8.50 13.40 335.06 8.89 67.46 106.22 1.10 1.12 0.86 4.99 23.08 8.49 222.21 557.27 Actual production for FY10 17.09 131.00 185.25 10.39 13.70 357.43 8.88 84.00 108.69 1.16 1.56 0.12 4.89 19.89 14.23 283.93 641.36 Estimated production for FY11 27.03 135.00 191.69 11.62 16.42 381.76 9.13 84.00 113.92 1.71 1.68 0.11 5.50 36.00 14.40 308.08 689.84

Crops Aus Aman Boro Wheat Maize Total cereal Jute Potato Vegetables Moong Mosur Gram Mustared Sugarcane (Excl. mills) Onion Total noncereal crops Grand total

Source: Directorate of Agriculture Extension (DAE)

Bangladesh government is trying very hard to have self-sufficiency in rice production which is hampered usually by the factors like unfavorable weather events e.g., cyclone, flood. Besides, production of noncereal minor but essential crops like pulses, oilseeds, onions, ginger, dry chillies, and other spices are declining at levels far lower than actual demand, resulting in high import dependence.

2.1.3

In annual agricultural credit program BB targets a disbursement of Taka 126.17 billion for

FY11 which is 9.6 percent higher than that of FY10. The agricultural credit program for FY11 has reiterated the availability of loans for stimulating cultivation of oilseeds, pulses, spices and maize, at a low (2.0 percent per annum) interest rate; the lending banks will be recompensed against this below market lending rate from budgetary allocation of the government. To stimulate the agricultural production through greater access of the farmers to the banking system, BB has taken some new measures, such as, organization of countrywide road-show to raise awareness about disbursement of agricultural credit. 15

Industry sector 2.1.4 According to the provisional estimate of BBS, the industry sector registered a 6.01 percent

growth in FY10, which is lower than the 6.46 percent of FY09. Both sub-sectoral growth and share in GDP increased for mining and quarrying, electricity, gas and water and construction sub-sectors in FY10 showing positive sign of recovery in industry sector. However, manufacturing subsector recorded significant slower growth (Table 2.1.3). 2.1.5 Manufacturing subsector, the largest and the dominant part of overall industrial production,

estimated to grow at 5.73 percent during FY10 as against growth rate of 6.68 percent in FY09. A delayed impact of global financial meltdown coupled with power shortages and decline in exports of several commodities during first three quarters in FY10 are mostly attributable reasons for lower growth in manufacturing. Strong performance of the major export-earning knitwear and woven garment sectors coupled with base effects led to 29.9 percent export earnings growth in the first four months of FY11. 2.1.6 Table 2.1.3: Sub-sectoral growth and share in GDP of the industrial output (Growth in percent)
Sub-sectoral growth rate FY07 Industry sector Manufacturing Large and medium Small scale Mining and quarrying Electricity, gas and water Construction 8.38 9.72 9.74 9.69 8.33 2.10 7.01 FY08 6.78 7.21 7.26 7.10 8.94 6.77 5.68 FY09 6.46 6.68 6.58 6.90 9.84 5.91 5.70 FY10(r) 6.01 5.73 5.50 6.30 10.05 6.87 5.85 Sub-sectoral share in GDP FY07 29.45 17.55 12.47 5.08 1.18 1.57 9.15 FY08 29.70 17.77 12.63 5.14 1.21 1.59 9.13 FY09 29.86 17.90 12.71 5.18 1.25 1.59 9.12 FY10(r) 29.88 17.86 12.66 5.20 1.30 1.60 9.11

Source: BBS. r denotes revised estimate of BBS. 2.1.7 The 39 percent increase in capital goods and others imports during the first two months of

FY11 compared to the same period of FY10 indicates strong recovery of the industrial output activities. Latest available data showed that Term loan disbursement in industries also increased by 3.71 percent during April-June period in FY10 over the same period of FY09 indicating strengthening of new investment activities in FY11.

16

Services sector 2.1.8 According to the provisional estimates of BBS, the service sector registered a 6.38 percent

growth in FY10, higher than the 6.32 percent growth recorded in FY09. Most of the sub-sectors of service sector are linked with the growth of agriculture and industry sector and these sub-sectors activities are also gaining momentum steadily; with continued expansion of new capacities in major subsectors such as hospitality (hotels, restaurants), healthcare and education. Growth in many subsectors of service sector like wholesale and retail trade, transport, storage and communication depend on agriculture and industrial growth. Public administration and defence sub-sector is showing a higher growth in FY10 compared to the previous fiscal year. The contribution of service sector to GDP stood at 49.88 percent in FY10 which is higher than 49.66 percent of FY09. Table 2.1.4: Sub-sectoral growth and share in GDP of the service sector outcome (growth in percent) Sub-sectoral growth rate FY07 Service sector Wholesale and retail trade Hotel and restaurants Transport, storage and communication Financial intermediation Real estate, renting and business Public administration and defense Education Health and social works Community, social and personal services 6.92 8.04 7.52 8.03 9.18 3.76 8.41 8.96 7.64 4.58 FY08 6.49 6.82 7.55 8.55 8.89 3.75 6.21 7.80 7.02 4.62 FY09 6.32 6.21 7.58 8.01 8.99 3.81 7.01 8.05 7.20 4.70 FY10(r) 6.38 5.10 7.62 7.20 8.35 3.84 9.64 9.29 8.10 4.75 Sub-sectoral share in GDP FY07 49.18 14.24 0.69 10.18 1.76 7.64 2.75 2.54 2.29 7.09 FY08 49.47 14.37 0.70 10.44 1.81 7.49 2.76 2.58 2.31 7.01 FY09 49.66 14.41 0.71 10.65 1.86 7.34 2.78 2.64 2.34 6.93 FY10(r) 49.88 14.43 0.72 10.77 1.90 7.20 2.88 2.72 2.39 6.85

Source: BBS. r denotes revised estimate of BBS.

17

2.2 2.2.1

Consumption The total consumption expenditure as a share of GDP increased to 81.01 percent in FY10 from

79.90 percent in FY09, resulting mainly from increased share of both private and general government consumptions. The share of private and general government consumption increased to 75.61 and 5.41 percent in FY10 from 74.60 and 5.30 percent in FY09, respectively. The increase in private consumption as a share of GDP is presumably aided by increased disposable income (12.90 percent increase in FY10); strong remittance inflows from workers abroad contributed significantly to this increased private consumption. The increase in general government consumption expenditure is partly supported by higher revenue expenditure due to implementation of new pay scale for government employees as well as implementation of second incentive package for export and other industry sectors. Table 2.2.2: Consumption shares in percentage of GDP and its growth rate Growth rate (%) Total Private General Govt. 2000-01 6.79 6.88 5.41 2001-02 7.54 6.84 19.60 2002-03 9.94 9.44 17.61 2003-04 9.55 9.20 14.53 2004-05 10.67 10.60 11.54 2005-06 11.82 11.79 12.19 2006-07 13.50 13.51 13.34 2007-08 15.59 15.97 10.44 2008-09 12.95 13.00 12.21 r 2009-10 14.16 14.05 15.79 Source: BBS, r-denotes revised 2.3 Savings, Investment, FDI, and ODA Year Consumption-GDP ratio (%) Total Private General Govt. 82.00 77.50 4.51 81.84 76.84 5.00 81.37 76.02 5.35 80.47 74.94 5.53 79.99 74.45 5.44 79.75 74.21 5.44 79.65 74.12 5.53 79.69 74.41 5.28 79.90 74.60 5.30 81.01 75.60 5.41

Savings Gross domestic savings (GDS) as a share of GDP declined from 20.09 percent in FY09 to 18.99 percent in FY10 (Chart 2.3.1 and Table 2.3.1); the decline occurred both in private and public sector savings. Private saving-GDP ratio decreased slightly from 18.77 percent in FY09 to 17.72 percent in FY10, due presumably to higher consumption expenses as a result of rising trends of food inflation levels (p-t-p) during FY10. The ratio of public savings decreased from 1.32 percent in FY09 to 1.27 percent in FY10 (Table 2.3.1 and Chart 2.3.2) due partly to higher revenue expenditure over revenue earnings and lower surpluses generated by the state owned financial and non financial institutions. Gross national savings 18

(GNS)-GDP ratio also slightly decreased from 29.57 percent in FY09 to 28.75 percent in FY10 because of lower inflows of net factor income (NFI) in the second half of FY10 and net current transfer (NCT). In FY10, NFI increased by 15.87 percent while net current transfers grew by 16.0 percent.1 Chart 2.3.1: Savings-GDP ratio in Bangladesh
35 30 AspercentofGDP 25 20 15 10 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Domestic National

Source: BBS Table 2.3.1: Trends in savings as percentage of GDP of Bangladesh Year Private Savings 16.72 16.89 17.01 17.05 17.41 18.19 18.63 18.84 18.94 18.96 18.77 17.72 Public Savings 0.99 1.00 0.99 1.11 1.22 1.34 1.38 1.41 1.41 1.35 1.32 1.27 Domestic Savings 17.71 17.88 18.00 18.16 18.63 19.53 20.01 20.25 20.35 20.31 20.09 18.99 National Savings 22.31 23.10 22.41 23.44 24.87 25.44 25.84 27.67 28.66 30.21 29.57 28.75

FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Source: BBS

The recent trend in private sector saving component shows that household financial savings through several channels such as banks and financial institution including NSD, institutional savings (e.g. profit by banks and financial institution), and inflow of workers' remittances contributed to increased private
1

BBS definition of NFI includes workers' remittances from overseas.

19

savings. In FY10, time deposit, remittances, and net sale of NSD grew by 19.55 percent, 13.40 percent, and 219.01 percent respectively over the same period of FY09. Chart 2.3.2: Trends in Private and Public Savings-GDP Ratio in Bangladesh
20 15 AspercentofGDP 10 5 0 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Private
Source: BBS

Public

Source: BBS Trends of the GDS to GDP ratio of Bangladesh are comparable to those of Pakistan and Sri Lanka but are substantially lower than that of India (Chart 2.3.3). Although GDS fall short of the level of investment in Bangladesh, national saving has exceeded the level of investment in the recent time due to lower investment over saving stemmed from global financial crisis. Chart 2.3.3: GDS-GDP Ratio in Selected South Asian Countries

As percent of GDP

40 35 30 25 20 15 10 5 0 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09FY10P
Bangladesh India Pakistan Sri Lanka

Source: BBS; Reserve Bank of India (www.rbi.org.in), State Bank of Pakistan (www.sbp.org.pk), and The Central Bank of Sri Lanka (www.cbs.org). P=Provisional.

20

Investment Despite mild recession impacted by global financial crisis domestic economic activities in H1 of FY10 nominal investment-GDP ratio increased to 24.96 percent in FY10 from 24.37 percent of FY09 (Table 2.3.2 and Chart 2.3.4) due mainly to rebounded investment activities in H2 of FY10. Private investmentGDP ratio increased from 19.67 percent in FY09 to 20.19 percent in FY10, and similar ratio of public investment increased from 4.70 percent in FY09 to 4.77 percent in FY10 (Chart: 2.3.5 and Table 2.3.2). Chart: 2.3.4 Nominal Investment-GDP Ratio
27 25 As percent of GDP 23 21 19 17 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Current prices

Linear (Current prices)

Source: BBS. Table 2.3.2: Trend in Private and Public Investment (As Percent of GDP) Year FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Source: BBS Private 15.61 15.85 16.78 17.21 17.83 18.32 18.65 19.02 19.25 19.67 20.19 Public 7.41 7.25 6.37 6.20 6.19 6.21 6.00 5.45 4.95 4.70 4.77 Total 23.02 23.10 23.15 23.41 24.02 24.53 24.65 24.46 24.21 24.37 24.96

21

It is worthwhile to mention that the declining share of public investment in GDP reversed in FY10; resulted apparently from slightly higher implementation of the Annual Development Program (ADP) than that of last few years. Chart: 2.3.5: Trend in Private and Public Investment
25 20 As percent of GDP 15 10 5 0 FY00 FY01 FY02 FY03 FY04
Private

FY05
Public

FY06

FY07

FY08

FY09

FY10

Source: BBS Investment-GDP Ratios in Selected South Asian Countries Trends of investment-GDP ratio of Bangladesh are comparable to those of Pakistan but are lower than those of Sri Lanka and India. In FY09, investment-GDP ratio was 24.37 percent in Bangladesh, 34.88 percent in India, 24.5 percent in Sri Lanka and 19.0 percent in Pakistan (Chart 2.3.8). Figure 2.3.8: Investment-GDP Ratio in South Asia
40 As Percent of GDP 30 20 10 0 FY01 FY02 FY03 FY04 FY05 FY06 Pakistan FY07 FY08 SriLanka FY09 FY10

Bangladesh

India

Source: BBS and publication of central banks of respective countries 22

Foreign Direct Investment (FDI) Total Inflow of FDI decreased by 5.0 percent to USD 913.02 million in FY10 as compared with inflows of corresponding period of FY09, mainly due to global downturn. Besides, foreign investors were not keen to invest due partly to shortages of electricity, gas and water supply (Chart 2.3.6). Sector wise trend of FDI during FY02 to FY09 shows that FDI inflow increased in communication, transport and other services sectors. In FY09, these sectors received USD 587.4 million which is 61 percent in the total FDI, mainly due to a USD 43 million buyout of domestic investment in a telecommunication company by foreign investors. FDI inflow to manufacturing and trade and commerce sectors also increased in FY09, on the other hand, FDI inflow to power; gas and petroleum sector decreased, due partly to slow implementation of PPP framework. Chart 2.3.6: Trend of FDI Inflow to Bangladesh
1000 900 800 700 600 500 400 300 200 100 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

In Million US$

Total Manufacturing TradeandCommerce

Communication,TransportandOtherServices Power,GasandPetroleum Others

Source: FDI Survey Report, Statistics Department, BB. The sectoral share of FDI inflow during FY10 shows that telecommunication sector received the major share of about 49 percent in total FDI. In FY10, textiles and wearing sector, banking sector, power sector, gas and petroleum sector and others sector, on the other hand, received the share of 17 percent, 12 percent, 4 percent, 4 percent and 14 percent respectively of total FDI (Chart 2.3.7).

23

Chart 2 2.3.7: Sectora Share of FD during FY al DI Y10

Others Pow wer 14% 4% % Telecommunocati on 49%

Gasa and Petrole eum 4% %

Textile esand wea aring 17 7% Banking % 12% Source: FDI Surv Report, Sta vey atistics Depart tment, Banglad desh Bank.

Official D Development Assistance ( t (ODA) Prelimina data show that total O ary w ODA, compris sing of loan a grant, dis and sbursed by th multilatera and he al bilateral d donors increased by 30.1 p percent to US 2164.4 mi SD illion in FY10 from USD 1664.02 milli in 0 ion FY09. Of this amount, loan increase by 36.8 pe f ed ercent from U USD 1170.3 m million in FY0 to USD 16 09 601.04 n e eased by 14.1 percent from USD 493.7 million in FY to USD 563.4 m Y09 million in FY10, while grants incre million in FY10. In FY n Y10, total am mortization am mount increas by 32.3 p sed percent over F FY09. As a r result, net foreig financing in gn ncreased by 2 28.7 percent to USD 1316.4 million in F FY10 from U USD 1023.0 m million in FY09 ( (Chart 2.3.8). Chart 2. .3.8: Trends i the category-wise Foreign Aid inflow in Banglad in desh
2200 2 1900 1 1600 1 1300 1 1000 1 700 400 100 200 Total T FY09 FY10 166 64.028 216 64.436 Loan 1170.343 1601.045 Grants s 493.685 563.391 Amortisation 64 41.00 84 48.074

InMillionUSD

NetForeign Financing 1023.03 1316.362

Source: ERD. MoF. 24

Total aid inflow from multilateral sources increased by about 27.1 percent from USD 1267.4 million in FY09 to USD 1610.6 million in FY10. On the other hand, aid inflow from bilateral sources increased by 29.7 percent from USD 352.7 million in FY09 to USD 457.7 million in FY10. Aid inflow from other sources increased by 118.7 percent from USD 43.9 million in FY09 to USD 96.1 million in FY10 (Chart 2.3.9). Chart 2.3.9: Source-wise Trends of Foreign aid in Bangladesh
2500 2000 InMillionUSD 1500 1000 500 0 FY09 FY10 Total 1664.028 2164.436 Multilateral 1267.399 1610.648 Bilateral 352.71 457.719 Others 43.919 96.069

Source: ERD During FY02 to FY10 sector- wise aid component indicate that project aid component constituted the major share in total aid disbursement. The share of project aid increased from 86.7 percent in FY02 to 95.9 percent of total aid in FY10 (Chart 2.3.10). Chart 2.3.10: Sector-wise Trends of Foreign Aid inflow in Bangladesh
2500 2000 1500 1000 500 0 FY02 FY03 FY04 FoodAid FY05 FY06 CommodityAid FY07 FY08 ProjectAid FY09 FY10

Source: MEI, BB. 25

2.4

Fiscal Developments

Government Revenue Total revenue collection, both tax and non tax, performed well in FY10. Preliminary estimate of total revenue earning stood at Tk. 769.5 billion during FY10 as against the yearly revised target of Tk.794.8 billion, which is 16.3 percent higher than the actual revenue collection of FY09. In FY10, tax revenue and non-tax revenue earning stood at Tk.648.9 billion and Tk.120.7 billion as against the yearly revised targets of Tk.639.56 billion and Tk. 155.28 billion respectively, which is 17.8 percent and 9.8 percent respectively higher than their actual levels in FY09 (Chart 2.4.1). Chart 2.4.1: Trend in Revenue Earnings
900 800 700 In billion Taka 600 500 400 300 200 100 0 FY02 Source: MoF FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Revised FY10p 278.9 311.2 354.0 448.5 392.0 581.7 494.7 661.5

794.8

769.5

In FY10, the NBR revised its annual revenue targets at 610 billion, with revised value added tax (VAT) of Tk. 227.95 billion, income tax of Tk. 165.6 billion, customs duties of Tk. 106.91 billion, and other duties of Tk. 109.54 billion. As against these revised targets, NBR collected Tk. 240.8 billion from VAT, Tk. 95.2 billion from customs duties, Tk. 170.8 billion from income tax, and Tk. 114.3 billion from others sources in FY10. Public Expenditure The preliminary estimated data indicate that current expenditure stood at Tk. 660.73 billion in FY10 as against yearly revised target of Tk. 771.29 billion, which is 1.7 percent higher than the actual level of FY09 (Chart 2.4.2) mainly due to increased expenditure on subsidies and current transfer including relief

26

and stimulus packages for protecting economic activities from bad impact of global downturn, interest payment and salary of government employee. Chart 2.4.2: Trends in Current and ADP Expenditures

900 800 In billion Taka 700 600 500 400 300 200 100 0 FY02 FY03 FY04 FY05 FY06
Current

FY07
ADP

FY08

FY09

FY10 FY10 p Revised

Source: MoF

In the backdrop of low implementation of ADP, the target for development expenditure has been trimmed down to Tk. 285 billion for FY10 from Tk. 305 billion fixed in the FY10 budget. Preliminary estimate of ADP utilization stood at Tk. 256.1 billion in FY10 which is 90 percent of revised target. Budget Deficit The overall budget deficit in FY10 was revised at Tk. 310.39 billion (excluding grants, 4.5 percent of GDP) from original target of Tk. 343.58 billion (excluding grants, 5 percent of GDP). In FY10, deficit financing from domestic and foreign sources was revised at Tk. 173.25 billion and Tk. 99.72 billion respectively from original target of Tk. 205.55 billion and Tk. 86.73 billion respectively. Among domestic sources, bank financing was revised at Tk. 86.61 billion and non-bank financing at Tk. 86.64 billion as against the original projection of Tk. 167.55 billion and Tk. 38 billion respectively. During FY10, preliminary estimate of total deficit financing amounting to Tk. 181.0 billion and was accommodated through Tk. 78.80 billion from domestic sources including bank financing of Tk. (-) 43.76 billion and non-bank financing of Tk. 122.56 billion and Tk. 102.18 billion from foreign sources (Chart 2.4.3).

27

Chart 2.4.3 Sources o Financing of Budget Deficit 3: of g

180 160 140 120 100 80 60 40 20 0 FY0 02 FY03 FY04 FY Y05 FY06 FY07 Foreign D Domestic FY08 F FY09R R FY10

2.5 2.5.1

growth in Bangladesh registered a negative 11. percent (Table 2.5.1) growth durin Q1FY10 w n .66 ng which turned aro ound quickly and started to recover s y slowly and re egistered a 0 percent g 0.9 growth in Q2FY10 followed b a positive 10 percent g by growth in Q3F FY10 and hig 18.5 percen growth rec gh nt corded in Q4F FY10. Overall, d during FY10, USD16.20 b , billion of exp proceeds have been r port s received whi is 4.11 pe ich ercent higher tha the previou fiscal year. In spite of d an us deceleration in export grow at the beg n wth ginning of the year, e the overal performanc of exports h ll ce have been sat tisfactory and successfully overcame th impact of e d y he export reduction and showed further posi d itive growth p performance by the end o FY10. Du of uring Q1FY11 the 1, export in Bangladesh registered a remarkable g growth of 29. percent c .97 compared to t same peri of the iod the preced ding year of Q1FY10 resul Q lting from stro global re ong ecovery from crisis.

InbillionTaka

ource: MEI,B BB. So Exports E With W the onset of second ro t ound impact o global recession, the yea of ar-on-year (y-o-y) rate of e export

Table 2.5.1: Quarterly e : exports and export grow rates wth

Exp ports in billion USD n FY09 9 eptember July-Se Octobe er-December January y-March April-J June 4.38 3.37 3.88 3.94 FY10 3.87 3.40 4.27 4.66 16.20 FY11 5.03 Growth rate e (percent, y-o-y ( y) FY10 F FY11 -1 11.64 0.89 0 10.05 1 18.54 1 4.11 4 29.9 97

Total 15.57 7 Source: Export Prom motion Burea au.

28

2.5.2

Although the competitive strength of apparels and textile exports (to lower ends of markets in

advanced economies in North America and Europe) has kept overall export growth at double digit level in FY09; the EBP data reveals that the two major export item in this group, namely woven garments and knitwear recorded only 1.6 percent and 0.8 percent growth respectively during FY10. On the other hand, in the agricultural product category, outstanding performance has been shown by raw jute and jute goods with 32.5 percent and 100.6 percent growth respectively during FY10 (Table 2.5.2), both rates were negative 10.23 percent and 1.42 percent respectively during FY09. During first quarter of FY11 performance of woven garments and knitwear exports rebounded strongly which recorded 30.05 percent and 31.88 percent (y-o-y) growth respectively in Q1FY10. In the agricultural product category, raw jute and jute goods posted a robust growth of 53.83 percent and 28.03 percent respectively during Q1FY11.

Table 2.5.2: Commodity-wise exports (in million USD)

Changes during FY10 over FY09 (in percentage) 32.52 100.62 -54.03 30.01 -3.76 1.6 0.84 -72.47 18.48 11.64 4.11 Changes during FY11 over FY10 (in percentage) 53.83 28.03 -53.75 42.24 35.52 30.05 31.88 -42.63 12.67 30.70 29.98

Products

FY10 (JulyJune) 196.37 540.17 5.65 230.52 437.40 6013.43

FY09 (JulyJune) 148.17 269.25 12.29 177.32 454.51 5918.51

FY11 (July-Sep)

FY10 (July-Sep)

1. 2. 3. 5. 4. 6. 7. 8. 9. 10.

Raw jute Jute goods Tea Leather Frozen food Woven garments Knitwear Fertilizer Terry Towels Others Total

55.21 154.30 0.37 64.39 139.76 1790.24 2181.28 14.83 38.07 4438.45 5029.05

35.89 120.52 0.80 45.27 103.13 1377.14 1653.62 25.85 33.79 3396.01 3869.10

6483.29 6429.26 38.55 140.22 157.07 132.57 2102.30 1883.09 16204.65 12816.11

Source: Export Promotion Bureau. 2.5.3 Exports of apparels, textiles and other lower value items can be expected to regain growth

momentum in coming fiscal years as recovery from global recession progresses. Although the woven garments and knitwear (together which constitute more than two third of export basket) showed slightly negative growth during first three quarters of FY10; a sustained positive growth momentum was achieved during Q1FY11 since the country still holds its export competitiveness in these items and is expected to continue during FY11 .

29

Export competitiveness of exchange rate of Taka 2.5.4 The foreign exchange market remained mostly stable up to November09 and Taka started

depreciating slightly since December09 against USD; overall Taka depreciated marginally by 0.55 percent during FY10. Bangladesh Banks interventions in the domestic foreign exchange market by net purchase of foreign currencies of USD 2.16 billion during July-June FY10 kept exchange rate of Taka broadly stable with marginal undervaluation bias; with weighted average nominal exchange rate at Taka 69.45 per USD as of end June10 against Tk. 69.04 per USD at end November09 and Tk. 69.06 per USD at end June09. The REER based exchange rate changed to Taka 66.47 per USD at the end of May 2010 from Taka 63.05 per USD at the end of June09, indicating that the country has lost some of its external trade competitiveness over its partner countries during July-May FY10. 2.6 2.6.1 Imports About 75 percent of import consists of essential commodities, a large part of which are raw and

intermediate materials for industrial production. During FY10, imports (provisional, f.o.b.) registered only 5.4 percent growth amounting to USD 21.39 billion compared to USD 20.29 billion during FY09. This slower import growth can be partially attributed to the delayed impact of global financial crisis, reflected in the slower import for the export based capital machineries and raw materials, and good domestic harvest, reflected in the lower food grain import. Besides, imports of intermediate goods mainly used for manufacturing output declined by 0.97 percent during FY10 indicating weakness in new investment activities. During Q1FY11 the import payments increased by 37.26 percent from USD 4.61 billion in Q1FY10 to USD 6.33 billion. Major imports 2.6.2 The major imports are food grains, petroleum and petroleum products, capital machinery,

intermediate goods, e.g., clinker, scrap vessels, iron and steel scrap, paper and paper board; industrial raw materials, e.g., edible oil, raw cotton, yarn, textile fabrics and accessories for garments, pharmaceutical raw materials, chemical and chemical fertilizer; computer and its accessories; motor vehicles, etc. Food grains and other food items 2.6.3 Import of food grains declined during FY10; because of good domestic output of food grains

while imports of other food items increased robustly (30.9 percent). During the period, import of rice and oil seeds declined by 68.6 and 18.2 percent respectively. On the other hand imports of wheat, milk and cream, spices, edible oil, pulses and sugar increased by 18.4, 10.4, 75.8, 21.4, 49.8 and 57.4 percent respectively during the year because of its sustained demand and lower domestic production. 30

goods and oth capital m her machinery Capital g 2.6.4 Im mport of capital goods and other capita machinery r d al recorded a slo ower 5.6 perc cent growth d during

FY10 com mpared to FY09, followi F ing the rega aining of inv vestors confi idence. Slow demand i the wer in recession-hit advanced countries for the Ban d ngladeshi com mmodity esp pecially RMG products p G partly responsible for shrink king the capit machinery import dem tal y mand. Beside shortage of power an gas es, nd e ning initiative for setting up new indus es strial units or expanding th existing pla he ants. supply are also dampen Intermed diate goods, industrial raw materials w 2.6.5 Im mport of inter rmediate goo used for further proce ods; essing in man nufacturing se ector, decreased by

0.98 percent during FY compare to FY'09. Intermediate goods totali USD 10.1 billion in value Y10 ed ing 18 ported during FY10. Impo of crude petroleum, f g ort fertilizer, yar and textil and accessories rn, le were imp declined b 8.4, 24.9, 9.3 and 5.4 p by percent respe ectively durin FY10 whil imports of some other g ng le f goods increased; clinker by 6.1, POL by 1.2, chemica by 1.3, ph ; 6 als harmaceutical products by 28.8, dyeing and l y tanning m materials by 6.2, plastic an rubber artic by 15.0, raw cotton a staple fiber by 11.5 an 5.4 6 nd cles and nd percent re espectively du uring the perio od. 2.7 2.7.1 Current accou balance C unt Current accoun balance (CAB) recorded a surplus of USD 3.73 bi C nt d f illion during F FY10 compar to red

USD 2.42 billion durin FY09. In s 2 ng spite of contin nuous deficits in service an income ac s nd ccount, this su urplus in CAB w mainly att was tributable to s slower import growth (5.4 percent yearl growth on adjusted fob b t ly basis) and sustai ined high 13. percent gro .4 owth in inflow of workers remittances during the s w s s same period. Chart 2.7.1 show that the movement of CAB genera follows th movement of trade ba ws m ally he ts alance. In Q1 1FY11 CAB has recorded a negative grow of 55.16 p n wth percent with lower inflow of workers remittances (USD w 2.66 billio than the same period of previous ye (USD 2.71 billion). on) s ear 1

Sou urce: Banglad desh bank Quarterly, VII (3 January-M 3), March, 2010. 31

Trade balance 2.7.2 Trade deficit stood at USD 5.15 billion during FY10 against USD 4.71 billion during the previous

fiscal year. During Q1 FY10 trade account recorded USD 0.74 billion deficit which increased to USD 2.02 during Q2; again decreased to USD 1.17 billion in Q3 and in Q4 the deficit increased slightly to USD1.22 billion. However, during Q1 FY11 trade deficit recorded USD 1.29 billion compared to USD 0.74 in the same period of the previous fiscal. Services account 2.7.3 The net balance of services account during FY10 stood at a deficit of USD 1.24 billion compared

to a deficit of USD 1.61 billion during FY09. A close look at the quarterly data reveals that the service payments increased more sharply (36.49 percent) than receipts (11.83 percent) resulting in increase of deficit in the service account from USD 0.33 billion in Q1FY10 to USD 0.57 billion in Q1FY11. Income account 2.7.4 During FY10 income account recorded a deficit of USD 1.49 billion which is almost the same as

USD 1.48 billion recorded in FY09. The deficit in income account was highest in Q4 (Chart 2.7.1). During Q1FY11 income account recorded a deficit of USD 0.31 billion compared with USD 0.34 billion in Q1FY10. Current transfer 2.7.5 Surplus in the balance of current transfer account is a historical phenomenon in our BOP. During

FY10 current transfer experienced a 13.5 percent growth over the previous fiscal year and stood at USD 11.61 billion. As workers remittances constitute more than 95 percent of current transfer, relatively stronger growth of remittance inflow act as the driving force in generating the surplus of this account. Workers remittances recorded a growth of 13.4 percent and stood at USD 10.99 billion during FY10 from USD 9.69 billion of FY09. During Q1FY11 current transfer account recorded a surplus of USD 2.80 billion compared to USD 2.82 billion in Q1FY10.

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