The regional lender project 7.8% GDP growth for Bangladesh, highest among the Asian countries, for the current fiscal year
The Asian Development Bank (ADB) has said Bangladesh economy is expected to remain strong if the challenges during Covid-19 pandemic are managed well.
It forecasted 7.8% GDP growth for Bangladesh, highest among the Asian countries, for the current fiscal year 2019-20 (FY2020), whereas the government had projected an 8.2% growth.
The regional lender made the projection in its Asian Development Outlook 2020 report launched on Friday.
“Bangladesh economy continued to perform well despite the global economic slowdown. However, there exists a downward risk due to the Covid-19 global pandemic,” said ADB Country Director Manmohan Parkash.
According to the report, Bangladesh economy will also have a GDP growth of 8.0% in FY2021.
The growth forecasts rest on several assumptions of continued political calm, maintained consumer and investment confidence, depressed exports and imports in FY2020 and recovery in FY2021, expansionary central bank monetary policy, and favorable weather.
However, the forecasts does not reflect the impact of the Covid-19.
The country director said: “ADB’s preliminary estimates indicate that about 0.2% to 0.4% of Bangladesh GDP may be lost due to spillover effects of the global Covid-19 pandemic. If a significant outbreak occurs in Bangladesh, the impact could be more significant.”
“The outlook will be updated as more information becomes available. To cope with and mitigate the impact of the Covid-19, ADB is committed to support and collaborate with Bangladesh,” he added.
Challenges of Covid-19
Appreciating the government’s recent interventions, Manmohan Parkash said: “Addressing cash management challenges and broader resiliency issues due to Covid-19 related shutdowns and economic knock-ons could help minimize impact on Bangladesh economy.”
The outlook notes that low revenue mobilization continues to be a key challenge for Bangladesh economy. The low revenue to GDP ratio in Bangladesh diminishes the country’s capacity to sustain high economic growth and reduce poverty.
Revenues thus need to be raised significantly through comprehensive tax reforms, by expanding the tax base and making resource mobilization more efficient to support much-needed public expenditure on infrastructure, health and social development.
During the first eight months of FY2020, Bangladesh economy showed strong performance with growing domestic demand, supported by substantial increase in workers’ remittances.
Economic activity is expected to accelerate with higher government development spending; higher imports of liquefied natural gas, oil and construction materials; favorable power production, and government’s policy support to boost exports.
However, the Covid-19 pandemic could hamper such trend due to disruptions in export demands, suppressed consumption, and curbed remittances.
In FY2021, private consumption will continue to drive growth, aided by continued strong remittances. Private investment will revive on a stronger outlook supported by improvements in business regulatory environment and enforcement of single digit lending rates in banks.
A planned rise in public investment in large projects should help expansion in domestic demand. Improvement in global growth with expected government policy support will help the industrial activities expand.
Inflation will stay in check in both years, and expected to slightly edge up to average 5.6% in FY2020 on higher food prices as well as nonfood prices on account of higher domestic natural gas prices.
In FY2021, it will ease to 5.5% on better supply condition. The current account deficit will narrow in FY2020 due to moderate trade deficit and healthy remittances.
Asian countries GDP projection
As per the report, among Asian countries, India's growth forecast for FY2020 is 4% while it is 2.6% for Pakistan.
Meanwhile, the ADB forecasts 2.3% growth for China, 4.8% for Vietnam, -4.8% for Thailand, 0.2% for Singapore, 2% for the Philippines, 0.5% for Malaysia and 2.5% for Indonesia.
South Asia’s growth rate is forecast to slow from 5.1% in fiscal 2019 to 4.1% in fiscal 2020 and reaccelerate to 6% in fiscal 2021, largely tracking recovery in India. Across Asia and the Pacific, the authorities have introduced stimulus packages to support economic activity, the report said.
It also said, leaving aside external upheaval, growth in Pakistan will slow as agriculture stagnates, notably affecting cotton output, and as stabilization efforts constrain domestic demand.