Bangladesh’s gross domestic product (GDP) is expected to grow by 6.9% in fiscal year (FY) 2022, according to the latest Asian Development Bank (ADB) report Asian Development Outlook (ADO) 2022.
The report also said that the growth forecast reflects rebound in external trade and recovery in domestic economic activities fueled by implementation of stimulus packages and increased remittance.
However, inflation is expected to increase to 6% in FY22 from 5.6% in 2021 and the current account deficit is likely to widen from 0.9% of GDP in FY21 to 2.7% of GDP in FY22 on increase in imports and decline in remittance growth, the report added.
Soon Chan Hong, senior economist, Bangladesh resident mission, South Asia Department of ADB, presented the report virtually on Wednesday.
The report also said that the rise in external trade and the swift implementation of supportive fiscal and monetary stimulus measures to tackle the impact of the Covid-19 pandemic helped to foster a solid expansion in FY21.
The recovery was largely driven by rising industrial activity, up 10.3% from 3.6% in FY20, on impressive manufacturing growth of 11.6%, reflecting stronger exports bolstered by garment orders from key export markets.
Services grew by 5.7%, up from 3.9%, on a recovery mainly in wholesale and retail trade, but also stronger demand for accommodation and food services.
The growth in agriculture output, however, slowed to 3.2% from 3.4% due to a cyclone and prolonged flooding early in the fiscal year, the report added.
In the report, Hong also said that the main risk to this growth projection is higher prices for oil and imports, and the loss of export sales beyond those built in the present forecasts, mainly due to the Russian invasion of Ukraine.
Growth will continue to be strong in the current and following fiscal year, but below pre-pandemic levels because growth in industrialized economies is expected to slow on disruptions from the Russian invasion of Ukraine, he added.
Moreover, a major policy challenge is managing climate change for ensuring inclusive and environmentally sustainable growth, said the report.
Responding to a question, he said that the countries have something to learn from the current situation of Sri Lanka.
“Each country must continue to maintain its macroeconomic stability. This crisis did not come suddenly, this crisis is the accumulation of many substandard policies,” he added.
He also said that fiscal management is also responsible for this along with the higher size of debt.
However, Bangladesh has nothing to worry about. The government of Bangladesh is very prudent and the management system is also very good. The size of Bangladesh's debt is not too high, he added.
He also said that it is possible to avoid such a catastrophe if there is sufficient management and a long-term plan.
The Bangladesh context
Edimon Ginting, country director of the ADB, said that the ongoing socioeconomic recovery needs to be accelerated by enhancing domestic resource mobilization, incentivizing the private sector to create products and services, promoting modern green technologies, and fostering knowledge and innovation.
Growth performance of Bangladesh is quite remarkable in 2021. The strong rebound was supported by recovery in external trade, swift and effective implementation of supportive fiscal and monetary stimulus measures to tackle the Covid-19 pandemic and a sharp increase in remittances, he also said.
Inflation moderated to 5.6% in fiscal year 2021 from 5.7% a year earlier. Food inflation, in particular, moderated toward the end of the fiscal year on good winter crop harvest and increased rice imports, the ADB country director also said.
However, inflation is projected to edge up to 6.0% in FY22 due to rise in global food & fuel prices, he also said.
A strong expansion in exports, increased budget spending, public investment in larger infrastructure projects, and stronger private investment will play key roles behind this robust growth outlook, Ginting also mentioned.
Building climate resilient infrastructure and services, introducing carbon tax on fossil fuels, and promoting green investments will help to further advance the current policy initiatives for managing climate change for inclusive and sustainable green growth, he added.
The ADO 2022 also said that private investment will get stronger, reflecting a solid growth in private sector credit and imports of industrial raw materials and capital goods.
With large available funding, public investment will increase to support the implementation of priority large infrastructure projects. Growth in private consumption, however, may be affected by a decline in remittances, the report added.
The ADO 2022 also pointed out that managing climate change is critical to ensure inclusive and environmentally sustainable growth.
As part of developing a national adaptation plan by the government, a climate risk–informed master plan should be drawn up for each sector and development unit.
According to ADB, it has already provided $2.2 billion in loans and $7.23 million in grants for managing socio-economic impacts of the Covid-19 pandemic and supporting quick recovery.
ADB also programmed $8 billion firm and $5.4 billion standby project assistance for Bangladesh during 2022-2024.
