Gross Domestic Product (GDP) growth hasmoderated from 6.7 percent in FY11 to 6.3 percent in FY12due to unfavorable external economics and internal supplyconstraints. Monetary policy remained accommodative for mostof 2011 but gradual tightening is occurring. With the highfiscal deficit and domestic borrowing by Government,monetary policy is now bearing the brunt of macroeconomicpolicy adjustment. The balance of payments (BoP) is on adeteriorating track, with reserves falling to below threemonths of imports and export growth turning negative inMarch 2012. A coordinated policy response is required toease macroeconomic pressures and improve growth prospects.Key actions include the need to create fiscal space, containgovernment borrowing to mitigate the risk of crowding out ofcredit to the private sector, better regulate the capitalmarket, and stimulate investment and job growth in theexport sector. Unlike in 2008, Bangladesh has insufficientpolicy space to avert the negative impact of a globalslowdown through fiscal stimulus packages and monetary easing.
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