Exports, imports to rebound in third quarter: MCCI

The economy might see a turnaround between January and March, the third quarter of the current fiscal year, with export-import trades rebounding and remittance keeping up its upward trend, says Metropolitan Chamber of Commerce and Industry.

"It is assumed that the political situation will remain stable and peaceful in the coming days. Export, import, and remittances will therefore increase," the trade body said in its quarterly review released today. 

The foreign exchange reserve is likely to fall between January and March quarter this year due to payments to the Asian Clearing Union (ACU) against imports, the chamber said.

It projected that exports will rise to $3780 million and imports to $5200 million in March, from their December levels of $3525 million and $4650 million respectively.

The projections came at a time when both exports and imports posted negative growth in January compared to their year-ago period amid gradual decline in private sector credit growth, signaling a slowdown in manufacturing activity.

Though most local economic indicators are facing uncomfortable ride amid a gloomy global economy, the GDP growth in the current fiscal year is expected to exceed last year's 8.15 per cent, the leading chamber forecasts in its latest review. 

It referred to the central bank's Monetary Policy Statement that projects GDP growth at 8.2 percent in FY20, while the World Bank and Asian Development Bank predicted 7.2 and 8.0 percent economic growth respectively.

The MCCI said, in the second quarter (October-December) of the 2019-20 fiscal year, some economic indicators such as remittances, inflation, foreign exchange reserves were positive, although most of the local economic indicators faced an "uncomfortable ride amid a gloomy global economy." 

The economy faced a number of challenges on its business and fiscal fronts in recent times, even though the political atmosphere has been peaceful, it pointed out.

Referring to the government's target to achieve a middle-income country status by 2021, the Metropolitan chamber said, to attain this goal, the government will need to accelerate the rate of economic growth to about 10 percent from the present 8.15 percent, expand exports, and stimulate investment. 

It listed the challenges ahead which need to be addressed like inflationary pressure, slower growth in the export and import, shortfall in tax collection, vulnerable banking sector, slow credit growth to the private sector, fall in the key indexes of the capital market, lack of investor confidence and a lower rate of investment specially foreign direct investment (FDI). 

While remittances have kept on increasing, exchange rate remained stable and foreign exchange reserves rose to a comfortable level, it added.
 
During July-December of the current fiscal year, agriculture, manufacturing and services sectors--all performed well, but continuous government support of various types will be needed to sustain the tempo of growth. 

Infrastructure deficits including gas and power supply problems along with faulty transmission capacity of power are now undermining the performance of all productive sectors of the economy. Government should adopt adequate steps to overcome these problems, and achieve and maintain political stability, which are essential for creating an investment-friendly climate, so crucial to achieve higher economic growth.

In addition, the government will need to improve the country's road, river and rail infrastructure, develop port facilities, increase power and gas production, and remove other infrastructure bottlenecks as such impediments will delay in the execution of development projects, the chamber suggested.