The bank said Bangladesh needs to upgrade its infrastructures including ports with requisite road and rail links to seize its full economic potentials, particularly in export-led manufacturing expansion.

However, the ADB's downward adjustment of GDP growth from their earlier prediction of 5.7 percent seems to depend on boro harvest this season.

There is also a pressing need to address governance issues including reducing corruption and checking law and order slides, the multilateral lender said.

"The growth performance will be underpinned by expansion in both domestic and external demands. We are expecting solid increases in government and private consumption," said the ADB economic update released yesterday.

About agriculture sector, the bank said though aus output was slightly lower last year, aman production, the second major crop, was exceptionally good with 3.6 percent growth relative to last year.

Though inferior seeds, fertiliser crisis and inadequate irrigation affected boro cultivation in some part of the country, boro harvest is expected to be good mainly due to an estimated three percent increase in acreage, ADB said.

The manufacturing sector sharply rebounded as indicated by the turnaround in manufacturing exports, imports of industrial raw materials and expansion of industrial credit, observed the economic update.

During the first eight months of this fiscal, exports of two major manufacturing goods --garment and knitwear --increased 14 percent and import of industrial raw materials and intermediate goods by 22 percent, it mentioned.

Besides, the bank said, industrial term loan disbursements surged by 76 percent in the first six months of the current fiscal.

ADB further said infrastructure constraints, political disruptions particularly hartals and law and order slide continue to hamper industrial growth and investment in the country.

The update mentioned that revenue collection during the first nine months of FY2004 increased by 9.2 percent over the same period of the previous fiscal but was still short of the target by 3.1 percent.

The revenue collection target was achieved during July-January period but collection in February and March were significantly (16.4 percent and 8.1 percent) below the targets, it added.

Despite the shortfall in revenue collection, the budget deficit in FY2004 is expected to be lower than the targeted 4.8 percent of GDP, principally on account of the shortfalls in implementation of annual development programme, the update said.

Inflation however declined from 6.7 percent in November 2003 to 5.8 percent in February 2004, it added.