Bangladesh’s economic growth is expected to grow 6.9% in FY2016-17 as domestic demand rises more slowly and the slide in workers’ remittances deepens, according to the Asian Development Outlook 2017.
“The GDP growth will slow down with the decline in the agricultural and export growths and the rise in import growth,” said Jyotsana Varma, Principal Country Specialist of the Manila based development partner while presenting the outlook at a press conference at its office on Thursday.
Varma, however, described the outlook as a very positive for Bangladesh. “Though the GDP growth to slow down, a 6.9% growth is positive and huge compared to other countries,” she added.
ADB Deputy Country Director Cai Li, team leader of external affairs Gobinda Bar and consultant Dr. Zahid Hossain were also present at the press conference.
In the outlook, the ADB said slower export growth caused by weaker consumer demand in the euro area and the United Kingdom is expected in part because the currencies of these destination markets have depreciated against the dollar.
Increases in wages and continued access to credit will help to sustain private consumption, it said, adding that private investment will rise only slightly as investors turn cautious ahead of national elections in 2018.
Public investment is expected to strengthen through fiscal expansion as the authorities speed up their implementation of infrastructure projects, ADB said.
Agriculture is expected to slow further to 2.4% growth in FY2017 and 2.3% in FY2018, mainly because of limits on area expansion and productivity improvement, it said and adding that industry growth is expected to decelerate to 10.6% in FY2017 in tandem with domestic demand.
With reinvigorated domestic demand resulting from higher export income and a more moderate decline in remittances, industry growth will edge back up to 10.7% in FY2018 and services growth is expected to slow to 6.0% in FY2017, reflecting slower growth in agriculture and industry, and remain unchanged in FY2018, said the ADB.
It said inflation is projected to pick up in FY2017 to average 6.1%. Inflation is expected to edge up further to 6.3% in FY2018 as global fuel prices continue to rise and a new value-added tax comes into effect at the start of the year.
The monetary policy statement for the second half of FY2017 (January-June 2017) supports growth while mitigating inflation risks, it added.
Exports grew by 4.4% in the first 7 months of FY2017, down from 8.3% in the year-earlier period, it said, adding that growth in readymade garment exports was 4.1%, down from 9.1%.
“Export growth is expected to strengthen in the second half of FY2017 on higher projected growth in the industrial economies, but exports for the full year are expected to slow to 6.0% from 8.9% in FY2016,” it said.
ADB said export growth in FY2018 is projected to edge up to 7.0% on steady external demand and improvement in the Bangladesh market share.
It said imports are expected to grow by 9.0% in FY2017 and 10.0% in FY2018 on broadly stable domestic demand and some pickup in global prices for commodities, especially oil.
Remittance inflows dipped by 17.6% to US$6.2 billion in the first half of FY2017 as economic tightening continued in Gulf Cooperation Council economies and newly constrained inflows from the US and the United Kingdom appeared to reflect political uncertainties there.
Despite the 23.5% rise in jobs abroad for Bangladeshi workers in the first 6 months of FY2017, remittances are expected to sink further by 7.0% in FY2017 and 4.0 percent in FY2018.
Replying to a question, ADB Staff Consultant Mohammad Zahid Hossain said, “Bangladesh economy attains its internal capacity. The domestic demand is driving the growth in the last two-three years”.