The growth forecast for FY2020 reflects a sharp decrease in economic activities in the last quarter due to the effect of the coronavirus pandemic in Bangladesh
Downgrading its April’s forecast on GDP growth, the Asian Development Bank (ADB) yesterday said the economic expansion for the current fiscal year would be 4.5%, and a 7.5% growth was likely in the next fiscal year.
The South Asian economy would grow at 6.2% in FY 2021, it forecast.
In the last fiscal Bangladesh attained 8.15% gross domestic product (GDP) growth and set an 8.2% growth target for FY21.
The regional lender made the growth projections in its updated report of Asian Development Outlook (ADO) 2020 Supplement on Thursday.
“Bangladesh is likely to grow in FY20, but with the pandemic affecting the last quarter of its fiscal year, the growth projections are downgraded. Bangladesh had strong growth before the pandemic, but covid-19 has hit export earnings, and remittances are likely to have fallen sharply in March and April,” the ADB report said.
The GDP growth was expected to slow down to 4.5% in FY20 but it would expand to 7.5% in FY21, helped by strong manufacturing activities, the regional lender forecast.
“After a robust performance in the first nine months of FY20, Bangladesh economy would slow down in near term due to Covid-19 pandemic but it is likely to recover in FY21,” said ADB Bangladesh country Director Manmohan Parkash.
“Managing the pandemic is a priority and the FY21 forecast depends on how the recovery shapes up in the coming months”.
Appreciating the resilience of Bangladeshi people, Parkash said global economic recovery, proactive initiatives to attract investments, creating local employment opportunities, and providing easier access to finance for farmers, entrepreneurs and small businesses could help jumpstart the economy.
ADB has so far provided $600 million in loans and $1.4 million in grants for managing health emergency and mitigating the initial socio-economic impacts of the pandemic.
“In 2021, ADB will continue its strong support to help Bangladesh economy to recover and rebound from the impacts of Covid-19,” Parkash added.
The government’s strict containment measures resulted in sharp reduction in consumption, production, and investment in the last quarter of FY20. Sweeping global spread of Covid-19 and containment measures in major export markets sharply reduced export earnings, the report mentioned.
When the economy to recover
The recovery will depend on how the economy shapes up in the coming months and the success of tackling virus contamination.
Economic activities were expected to slowly return towards a normal path after restrictions were gradually lifted by the government in June 2020, said the ABD.
In FY2021, gradual recovery was expected to start from the first quarter, aided by the government’s stimulus measures in the absence of the recurrence of COVID-19 outbreak, the regional lender anticipated.
Afterward, strong manufacturing base and recovery in global economy would enable Bangladesh to experience a quick recovery. However, risks to the outlook were tilted downward including a prolonged or recurrence of covid-19 outbreak in Bangladesh and export destinations, said the ADB.
Inflation to remain at 5.6% in FY21
Inflation is expected to slightly edge up to average 5.6% in FY20 on higher food prices as well as nonfood prices on account of higher domestic natural gas prices.
However, in FY21, it will ease to 5.5% on better supply conditions.
The inflation forecasts rest on the assumption that potential upward pressure in prices from the covid-19 pandemic related stimulus measures are expected to be offset by fall in demand from the consumers.
With the impact of Covid-19, the economic outlook is grim for South Asian nations. After the introduction of lockdowns in late March, economic activity in South Asia has stalled.
For the FY21, a 3% GDP is forecast for Afghanistan followed by Bhutan 1.7%, India 5%, Nepal 3.1%, Pakistan 2% and Sri Lanka 4.1%.
On top of that, a 13.7% GDP growth is projected for Maldives as its recovery is expected to be particularly strong as its high-end tourist clientele have been less affected by the pandemic.