GDP to grow by 6.8% buoyed by exports
The Asian Development Bank (ADB) has projected strong economic recovery for Bangladesh in the 2020-21 fiscal year, where gross domestic product (GDP) is expected to grow by 6.8% riding on strong manufacturing and exports.
However, the prolonged Covid-19 pandemic in Bangladesh or its export destinations may threaten the recovery and growth projection.
Meanwhile, the South Asian economy will grow at 7.1% in the FY 2021, while the developing Asian economies are expected to contract by 0.7% in 2021.
The regional lender made the growth projections in its updated report of Asian Development Outlook (ADO) 2020 on Tuesday.
"GDP growth is projected at 6.8% in FY2021, revised down from ADO 2020 because Covid-19 and its impacts are lingering longer than expected, and government stimulus packages have had little time to take hold," said the outlook report.
As per the provisional data of Bangladesh Bureau of Statistics (BBS), in the last fiscal year Bangladesh attained 5.24% GDP growth, while the government set an 8.2% growth target for FY2021.
With cautious reopening of the economy since May 2020 and subdued global economic conditions, recovery is expected to be gradual in the first two quarters of FY2021, the ADB said.
Then a strong manufacturing base will enable more rapid recovery in tandem with projected strengthening of growth in the advanced economies and import demand from them, it projected.
Prudent macroeconomic management and speedy implementation of the government stimulus measures are key imperatives to ensure the projected recovery. The main risk to this growth projection is a prolonged pandemic in Bangladesh or its export destinations, said the ADB.
"Bangladesh's economy has started recovering from the pandemic. Despite significant pressure on the health and pandemic management systems, the government has managed the economy well with appropriate economic stimulus and social protection measures, ensuring basic services and commodities for the poor and vulnerable," said ADB Country Director Manmohan Parkash.
Recent economic performance in exports and remittances, and government's macroeconomic management including securing foreign funds for economic stimulus and social protection have made this recovery feasible, he said.
"We are encouraged by the increase in exports and remittances, and hope the recovery will be sustained, which will help in achieving the projected growth rate.
Early access to vaccines and continued emphasis on health pandemic management can help sustain this recovery," he said.
This crisis is an opportunity to undertake further reforms in resource mobilization, export diversification, employment generation, skills development, as well as social protection; and ADB is working with the government in these areas to provide further support, Parkash added.
Projection on major economic indicators
Bangladesh exports are expected to grow by 8% in FY2021, with gradual recovery in the first half accelerating in the second along with the expected upturn in the global economy.
Export recovery will be aided by government stimulus measures and efforts to improve the business climate, as well as using duty-free trade opportunities extended by the People's Republic of China, said the ADB.
Imports are expected to grow by 5% as the apparel sector returns to normal operations, which will require more raw materials.
In addition, the accelerated implementation of large infrastructure projects should boost imports of capital equipment and materials.
Growth in agriculture is projected rising to 3.5% in the current fiscal year, aided by government subsidies for seed, fertilizer, innovation, farm mechanization, and irrigation, and refinancing facilities to provide working capital for small and medium-sized farms affected by the pandemic.
Growth in industry is forecast at 10.3%, assuming improved consumer demand, strong export growth following recovery in major export markets, and expected growth in private investment.
Inflation is projected steady at 5.5% in FY2021 due to a good crop outlook and favourable international commodity prices.
As per the development outlook, South Asian economies' woes deepen as Covid-19 spreads.
Source: Asian Development Outlook 2020
In the current year, the economies of the South Asian nations are expected to shrink by a steep 6.8%, but it will rebound by 7.1% in 2021.
For the FY21, a 1.5% GDP is forecast for Afghanistan followed by Bhutan 1.7%, India 8%, Nepal 1.5%, Pakistan 2%, and Sri Lanka 4.1%.
On top of that, a 10.5% GDP growth is projected for Maldives as its recovery is expected to be particularly strong as its high-end tourist.
The sub-regional inflation forecast for 2021 is revised up marginally to 4.5%.
Developing Asia's GDP is expected to contract by 0.7% in 2020, marking its first negative economic growth since the early 1960s, as the Covid-19 pandemic continues to disrupt global economic activity.
However, the GDP of the developing economies is projected to grow by 6.8% in the FY21.
"Most economies in the Asia and Pacific region can expect a difficult growth path for the rest of 2020," said ADB Chief Economist Yasuyuki Sawada.
"The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures," he added.
China is one of the few economies in the region bucking the downturn. It is expected to grow by 1.8% this year and 7.7% in 2021, with successful public health measures providing a platform for growth.