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Monetary policy may not spur pvt investment, growth: UO

A private think-tank on Saturday cautioned that declining private sector credit growth resulting in stagnant investment and consequential unemployment may challenge efficacy of strategies of the just-announced monetary policy.

“Without increasing quality, a mere target of growth in private sector credit at 16.5% for the second half of the current fiscal year may prove ineffective in boosting private investment and achieving the target of growth in gross domestic product (GDP),” said Unnayan Onneshan (UO) in its economic update.

It pointed out that private investment remained stagnant and stood at 22.07 per cent of GDP in 2014-15 financial year and 21.78 per cent in 2015-16. An increase in public investment from 6.82 per cent in 2014-15 to 7.6 per cent in 2015-16 has not succeeded to create much needed crowding in for private investment, UO added.

It said private sector credit growth declined to 16.2 per cent in August, 15.3 per cent in September and 15 per cent in November 2016, from 16.8 percent in June 2016.

Taking the trend into consideration, the research organisation fears that the target of 16.5 per cent growth in private sector credit for second half of the current fiscal year may remain unachieved causing further stagnation in private investment.

UO mentioned that 9.1 per cent of the country’s youth labour force is currently unemployed.

Despite the current stability in consumer price index (CPI) inflation, the think-tank, referring to the monetary policy statement, expressed concern over the fact that average core inflation (non-food, non-fuel), a traditional measure of long-term inflation scenario, remains higher at around 7.6 per cent in December, indicating that inflation could pick up.

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