The latest report by the Asian Development Bank (ADB) states that the Bangladesh economy will grow to 6.9% this year and remain unchanged in the following year.
"In Bangladesh, South Asia's garment industry leader, exports are a key element driving growth that is forecast at 6.9% in 2017 and 2018," the Asian Development Outlook (ADO) report said.
The ADB report also described the projected growth rate as “more impressive, given the sluggish growth in developed economies in Europe and elsewhere that Bangladesh relies upon as markets for its exports and as sources of remittances.”
In the report, the ADB is confident about the nation’s prevailing political situation, expecting that the “political calm will continue and thus will support consumer and investor confidence.”
At the same time, the report expects that the central bank would be aware of keeping the inflation in check, while allowing ample private credit growth to support economic activity.
However, it points out that the gross domestic product (GDP) growth would be faster with higher demand in the euro area and if the United Kingdom does not depreciate its currency against the dollar.
The ADB is also very optimistic about the macro-economic sectors, and says in the report that increased wages and continued credit access will support sustainable private consumption.
The report also states that private investment will rise slightly, but public investment is expected to strengthen through fiscal expansion.
It projects an agriculture growth of 2.4% over the current fiscal year and 2.3% in the next, due to limits on area expansion and productivity improvement.
It states 10.6% industry growth is expected this year in tandem with domestic demand, with an increase to 10.7% in the coming fiscal.
As fuel prices continue to rise globally, a new value-added tax comes into effect in Bangladesh at the start of the year. This may influence the inflation to pick up at an average of 6.1% at the end of the current financial year and 6.3 % in 2018, the Asian Development Outlook predicts.
The report states that export growth would be stronger in the second half of this year, and this upward trend would continue in 2018 when the growth for this sector would edge up to 7%, considering the external demand remains steady and the market share improves.
It also states that employment of Bangladeshi workers’ overseas climbed to 23.5% in the first six months of the current fiscal year. However, remittance inflows have declined due to economic tightening by Gulf Cooperation Council countries and newly constrained inflows from the US and the United Kingdom.
The ADO cautioned that falling remittances and a larger trade deficit are expected to push the current account into a deficit of about 1% of GDP when the taka likely depreciates marginally in nominal terms.