The World Bank has lowered growth forecasts for Bangladesh due to slow exports and falling remittances.
The Washington-based lender predicts Bangladesh's gross domestic product (GDP) will stand at 5.9% for fiscal year 2014-15 beginning from next month.
It is much lower than the government projection of 7.3% and its earlier January’s projection of 6% for the outgoing fiscal year, according to the bank's latest Global Economic Prospects (GEP) June 2014 released yesterday.
The GEP report usually is published twice in a year examining growth trends for the global economy.
“Growth in Bangladesh averaged 6.3% during 2010-2013, but slowed to an estimated
5.4% during the fiscal year ending in June 2014, adversely affected by social unrest and disruptions prior to national elections in January, and by capacity constraints that have resulted in persistent inflationary pressures,” said the report.
In its Bangladesh Development Update in April, it estimated that the GDP growth will be 5.4% for the outgoing fiscal year. This is also much lower than the Bangladesh Bureau of Statistics provisional estimate at 6.12%.
The report identified domestic downside risks include stressed banking sectors, slow pace of reforms, and security uncertainties.
“Weak economic growth in recent years has taken a toll on corporate and bank balance sheets. Stressed bank loans (including restructured loans) exceed 10% of loans in Bangladesh.”
Non-performing loans (NPLs) in Bangladesh are concentrated in state-owned banks, which account for about a third of banking sector assets. NPLs as a share of total loans were the lowest in Nepal at 3.1%.
It said domestic demand in Bangladesh has been supported partly by robust agricultural harvests and migrant remittances.
As demand from the Euro Area and US improved in the second half of 2013, exports in Bangladesh grew rapidly. Bangladesh’s export growth, however, slowed in Q1 2014, partly due to the lagged effect of disruptions caused by political unrest.
Restrictions imposed by countries in the Gulf on the intake of Bangladesh migrants have resulted in reduced remittances. Inflation in Bangladesh declined during the second and third quarters of 2013, but picked up since Q4 2013, partly due to disruptions caused by political unrest.
South Asia’s GDP grew 4.7% in 2013, about 2.6 percentage points below average growth in 2003-12, mainly reflecting weak manufacturing performance and slowing investment in India.
Growth is expected to pick up modestly in 2014, and then rise to about 6% in 2015 and 2016, with firming global demand and easing domestic constraints offsetting a tightening of international financial conditions.
In its latest report, the Bank has lowered its forecasts for developing countries, now eying growth at 4.8% this year, down from its January estimate of 5.3%.
"Growth rates in the developing world remain far too modest to create the kind of jobs we need to improve the lives of the poorest 40%," said World Bank Group President Jim Yong Kim.
The global economy, it said, is expected to pick up speed as the year progresses and is projected to expand by 2.8% this year, strengthening to 3.4 and 3.5% in 2015 and 2016, respectively.