The country was also able to maintain a positive balance of payments during the period, thanks to steady growth in export-led manufacturing and increased remittance flow, said ADB in its 'Bangladesh Quarterly Economic Update-December 2004' released yesterday.

However, the bank said the government has to improve law and order situation and ensure more robust financial market institutions to continue this performance.

The bank estimated the GDP (gross domestic product) growth at 5.3 percent in FY 2005, slightly lower than 5.5 percent in the preceding year, due to flood related setback in farm production.

Overall agriculture growth during FY 2005 is estimated at only 0.4 percent from 2.7 percent in preceding year, reflecting a setback in food grain production.

According to the economic update, on a point-to-point basis inflation increased to 6.4 percent in November 2004 from 5.7 percent in July 2004. The higher inflation is caused by the increase in food prices due to the flood-related impact and rise in international commodity prices.

The stock market demonstrated notable improvement in terms of market index, market capitalisation and turnover. The Dhaka Stock Exchange General Index steadily increased by 104 percent in 2004, the report stated.

In the first five months of FY 2005, exports increased by 15.3 percent over the same period of the previous year. Imports also registered a high growth of 25.4 percent during the past four months of FY 2005, driven by higher imports of capital machinery, intermediate and consumer goods.

Despite a widening trade deficit, the current account still generated a surplus of $75 million in the first four months FY 2005, due to the rising trend in workers remittances.

During the first half of FY 2005 revenue increased by only 9 percent compared with the corresponding period of the previous year. Despite a shortfall in revenue the government borrowed less from the banking and non-banking sources, which was Tk10.7 billion during first five months of FY 2005 as against Tk24.5 billion in the corresponding period of FY 2004.

In FY 2005, the growth in services sector is likely to increase to 6 percent from 5.7 percent in the preceding year, ADB hoped.

Improvement in transport and trade services, a boost in the recruitment in public administration including the implementation of the revised pay scale and high profitability of private sector banks are expected to lift the services sector, the report said.

During the first four months of FY 2005, manufacturing output increased by 8 percent as against the corresponding period of the preceding year. The increase was driven by export oriented production particularly garments and knitwear.