Bangladesh coped up reasonably well against the pandemic and the economy showed early signs of recovery, says ADB
Asian Development Bank (ADB) on Wednesday stated that Bangladesh’s GDP growth rate may be in the range of 5.5% to 6% in the current fiscal, which is also quite enviable in the circumstances.
The organization also said the resurgence in Covid-19 cases and delays in availability in the supply of vaccines, both globally and domestically, could undermine the economic growth outlook. Under sustained global recovery and effective Covid-19 management, GDP growth is expected to further strengthen to 7.2% in FY2022.
Presenting the latest Asian Development Bank (ADB) report Asian Development Outlook (ADO) 2021, ADB senior economist Soon Chan Hong said ADB will provide $940 million loan to Bangladesh to procure Covid-19 vaccine that’s under process.
“ADB has already supported $500 million to fund immediate expenditures and programs for expansion of social safety nets and support to industries to protect jobs (with co-financing of $651 million). Besides, for economic restoration and job preservation/creation, we will provide $50 million loan to help restore economic activities of the microenterprises and $150 million loan to support self-employment and employment generation of unemployed youth, micro entrepreneurs, and returnee migrants (under process),” Soon Chan Hong added.
Hong mentioned that ADB will support $500 million to expand social protection and promote financial inclusion and further $500 million to strengthen public financial management and enhance access to finance (under process).
“For supporting the private sector, ADB will provide $10 million loan for emergency working capital support to Pran Dairy Limited and $782 million and guarantees through Trade Finance Program and Supply Chain Finance Program. Besides, a combination of guarantee and risk participation supporting $200 million of local currency loans, benefiting 774,000 individual borrowers through Microfinance Risk Participation and Guarantee Program,” he added.
ADB’s Country Director Manmohan Parkash said the pandemic has been going on for over a year now and most countries in the world have been affected.
“At ADB, we have devoted our efforts in helping our developing member countries combat the impacts of Covid-19 pandemic. We are now seeing a resurgence in the virulence of the pandemic with high morbidity and mortality, requiring our continued attention,” he added.
Compared to many developed countries in North America and Europe, and also other developing countries in Asia and the Pacific, the acuteness of the pandemic was less severe in Bangladesh during the first wave in 2020.
“Bangladesh coped up reasonably well against the pandemic and the economy showed early signs of recovery. Through FY2020 GDP growth plummeted to an estimated 5.2% from 8.2% in the previous year, it picked up in subsequent months supported by stimulus package implementation and recovery in global growth and world trade,” according to his statement.
Record remittance inflow keeps domestic demand buoyant
Record remittance inflow kept domestic demand buoyant and underpinned solid growth in private consumption. Unemployment, which had increased to 22.4% in April-July 2020, dropped sharply to 3.8% in September with stimulus package implementation and broad resumption of economic activity.
On the supply side, growth in the agriculture, industry, and service sector picked up. Medium-sized and large manufacturers reversed production volume contraction by 16.4% in Q4 FY2020 with 6.8% growth in Q1 FY2021. Likewise, bank credit to trade and commerce increased by 15.5% and consumer finance by 11.9% in the same period.
Cargo handled at the Chittagong port revived to the level recorded a year earlier. The commencement of the vaccination drive in February 2021, together with the improved global economic conditions and trade, and employment, helped the economic recovery.
“However, we are now experiencing the second wave of the pandemic with an increased number of infections and deaths. The healthcare system has been stretched again to its limits. The government has imposed lockdown and travel restrictions to control the spread of infection. These necessary measures will save lives but could adversely affect livelihoods and slow down economic recovery,” he added.
The situation is still fluid
The potential slowdown in vaccination due to supply-related issues may further exacerbate the already adverse situation. Moreover, the impact of the second wave in export-destination countries could also undermine economic recovery. Given that the second wave of Covid-19 is ongoing, and the situation is still fluid, these impacts were not considered in our outlook.
Revenue collection may also be higher than last year. Inflation is expected to be manageable in the range of 5.5 to 6%. Broad money growth is likely to reach the annual target of 15%. Overall growth in imports is expected to be modest, and the trade deficit is forecast to narrow marginally as recovery in exports outpaces imports.
The current account balance is expected to cross into a small surplus. Revenue growth, however, is expected to be modest. Public expenditure is targeted to grow more than the growth in revenue leading to a slightly higher deficit – about 6%.
Manmohan Parkash said attaining the targets of development and other spending could be challenging as revenue collection in the first eight months of FY2021 grew by only 5.2% compared to 9.1% growth in the same period a year earlier.
“Concerted efforts are needed for achieving the annual development program spending and boosting revenue. The outlook is subject to downside risks. However, ADB is fully committed to supporting Bangladesh,” he also said.
Parkash also added that Bangladesh's economy has withstood the impacts of the first wave of the pandemic with timely and effective stimulus measures, ensuring basic services and commodities for the poor and vulnerable. The economy is now going through the second wave of the pandemic, and the future growth will depend on how effectively it is managed.