The World Bank on Tuesday predicted a pick-up in economic growth for developing countries, spurred by falling oil prices and despite a slight slowdown in global engine China.
Developing countries' growth in gross domestic product (GDP) -- the broad measure of a country's output of goods and services -- was expected to hit an annual pace of 4.8 percent in 2015, up from 4.4 percent last year, and surge to 5.3 percent in 2016, according to the bank's latest forecasts.
"Following another disappointing year in 2014, developing countries should see an uptick in growth this year, boosted in part by soft oil prices, a stronger US economy, continued low global interest rates" and improvements in several large emerging-market economies, said the World Bank in a statement.
The update of its Global Economic Prospects report showed that momentum in the developing countries would like push growth in the global economy higher, to a moderate 3.0 percent in 2015 from 2.6 percent in 2014, despite persistent weakness in the eurozone and Japan.
For China, the leader of the emerging-market economies, "structural reforms, a gradual withdrawal of fiscal stimulus, and continued prudential measures to slow credit expansion will result in slowing growth to 6.9 percent by 2017 from 7.4 percent in 2014," said the anti-poverty development bank.
The GDP of the world's second-largest economy was projected to increase by 7.1 percent this year and slow slightly to a rate of 7.0 percent in 2016.
Another major emerging-market powerhouse, India, should be among the beneficiaries of the spectacular plunge in crude oil prices that have lost almost 60 percent of their value since June. The Asian giant, which is a net importer of crude oil, should see GDP accelerate to 6.4 percent this year from a 5.6 percent rate last year.

Weak oil prices also were expected to help Brazil, Indonesia, South Africa and Turkey fight inflation and reduce their current-account deficits, a major source of vulnerabilities to risks in the global economy, the World Bank said.
"What is critical is for nations to use this window to usher in fiscal and structural reforms, which can boost long-run growth and inclusive development," said Kaushik Basu, the World Bank's chief economist and senior vice president, in the statement.
Oil-producing countries, meanwhile, have been dealt a blow by the price plunge. Russia, which also is the target of Western economic sanctions, was expected to suffer a 2.9 percent economic contraction this year before crawling back into growth in 2016.
"In this uncertain economic environment, developing countries need to judiciously deploy their resources to support social programs with a laser-like focus on the poor and undertake structural reforms that invest in people," said World Bank President Jim Yong Kim.

Return of political instability dims prospects: economist

Star Business Report

The World Bank has forecast 6.2 percent economic growth this fiscal year, up from last year's 6.1 percent, supported by continued robust remittances and recovery in private consumption.
But the outlook is way below the government's target of 7.3 percent for the current fiscal year.
The growth forecast is based on the assumption of continued political stability, as witnessed throughout 2014, the multilateral lender said in the latest edition of its Global Economic Prospects report, released worldwide yesterday. But the return of political instability on the first day of 2015 has “watered down” the prospects, said Zahid Hussain, lead economist of the WB's Dhaka office.
Non-stop blockades mixed with local and nationwide hartals have badly hit farm incomes, disrupted inter-district road and rail transport, weakened buyers' confidence on the exporters' ability to deliver on time and halted the rebuilding of investor and consumer confidence, he said.  
Consequently, achieving the projected growth may be very challenging, Hussain said. However, if the instability is short-lived, the target can still be met -- given the economy's often demonstrated resilience. “The latter may be inadequate if the instability prolongs like it did in the second half of 2013,” Hussain said.
Economic activities began to normalise in 2014 as social unrest abated from a spike in the run-up to national elections. Consumer confidence appeared to be returning to their normal levels, Hussain said.
As a result, private consumption demand recovered from its somewhat depressed level the previous year, supported by good agricultural harvests, rebound in remittances and a smooth functioning of the services sector, particularly transport and trade.

Exports started badly in the first quarter, but showed encouraging signs of recovery in the second quarter.  
Private investment, which was stagnant the past three years, also appeared to be regaining some momentum, as witnessed by rising private sector credit growth towards the end of 2014, the WB economist said.
Sustained remittance inflow in 2014, which is a sizeable share of GDP, helped offset large trade deficits, the report said.
However, weak bank balance sheets continue to impede financing for an upturn the investment cycle, WB said.
Stressed bank loans including restructured loans exceed 10 percent of loans in Bangladesh, Bhutan, India and Pakistan.
Restructured and problem loans need to be recognised as nonperforming, even though this would impair capital (with possible need for fiscal support), according to the report.
Banking system reforms, particularly aimed at strengthening human resources, improving nonperforming loan management and raising capital ratios, would help improve financial intermediation.
The fiscal cost of food and fuel subsidies is also heavy. Energy subsidies alone amount to 6-10 percent of revenues in India and Bangladesh.
However, the decline in international oil prices has opened the prospects of saving the budgetary provisions made for energy subsidies, Hussain said.
India has taken advantage of the window of opportunity to reduce and reform subsidies and other governments in the region should follow suit, as per the report.
Furthermore, the oil price slide has strengthened the prospects of sustaining balance of payment surplus and the declining trend in inflation, according to Hussain.
The share of manufacturing in GDP has gradually increased, reflecting the impact of a programme of reforms, begun over a decade ago, which have enabled a successful integration into global supply chains, WB said.
Supply-side bottlenecks continue to hold back growth in the baseline forecast, particularly in Sri Lanka and Bangladesh, where economies are operating at close to capacity.
With power generation unlikely to keep pace with growing demand in the region, shortages are expected to persist in the near term, including in Bangladesh, India, Nepal, and Pakistan, according to the report.
Regional growth in South Asia is expected to steadily accelerate toward 6.8 percent by 2017, supported by a recovery in domestic demand, especially investment.
Global growth is expected to rise moderately, to 3 percent in 2015, and average about 3.3 percent through 2017.

News:The Daily Star/15-Jan-2015

    Classified loans stand over 56% of the total loans and advances mostly provided to 67 clients

Default loans gripped the scam-hit BASIC bank as clients were allowed to take loans beyond the single borrower exposure limit to ultimately turn defaulters.

The bank so far provided a total loan of Tk10,731 crore to 81 clients (business groups and individuals), exceeding the limit of 15% of its capital, according documents Dhaka Tribune obtained.

Of the loans, Tk9,600 crore provided to 67 clients became classified till November last.

Of the default loans, Tk3,500 crore became bad debt, having hardly any hope to be recovered.

The loans, barring few ones, were given between the year 2011 and 2013 during the tenure of the bank’s chairman Sheikh Abdul Hai Bachchu, who has been removed amid criticisms.

BASIC Bank is going through serious financial crises as the default loans grew abnormally, eroding its financial strength.

More than half the total loans of the bank turned classified last year - rising to 56.22% in November last year from 11.72% in December 2013.   

The total loans of the bank stood at Tk11,407.57 crore in November last year, of which Tk6,473 crore became classified. Of the default amount, 67% or Tk4,356 crore turned into bad loan. 

The bank disbursed a new loan of Tk557 crore last year while the default loan rose by Tk5,191 crore.

The financial indicators of the bank deteriorated extensively in November due to abnormal growth of default loans which raised concern for Bangladesh Bank.

Bangladesh Bank has decided to hold a meeting soon over the financial situation of the bank with the board of directors.

According to the bank statement, the newly classified loan rose faster in the first four months of last year.

The amount of newly classified loan rose to Tk1,867 crore in April last year from Tk217 crore in December 2013. 

Then the growing trend slowed down due to regularising loans through taking advantage of the relaxed loan rescheduling policy. The amount of new classified loan was Tk501 crore in November last year. 

The capital shortfall of the bank stood at Tk2,257 crore in November last year from Tk647 crore in December 2013. 

Capital Adequacy Ratio (CAR), a percentage of a bank’s risk weighted credit exposures, came down to negative 24.14% in November last year against the required 10%.

Bangladesh Bank signed a MoU with the BASIC bank in August last year, setting a condition to reduce the default loan rate to 15% by June this year. 

The World Bank expects the Russian economy to contract by 2.9% this year, and to grow just 0.1% in 2016

DHAKA :Deputy General Manger of Bangladesh Bank (BB) Swapan Kumar Roy has been promoted to the post of General Manager (GM) of the central bank yesterday, reports AFP/BSS.
He has been given new charge of Small and Medium Enterprise (SME) and Special Programme Division as the general manager.
Before his promotion as General Manger, he was working as Deputy General Manager in Financial Integrity and Customer Service Division.
Earlier, Swapan discharged his duty as the chief of Customers’ Interests Protection Centre (CIPC) of the BB.