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The World Bank has cut Bangladesh’s gross domestic product (GDP) growth forecast for the fiscal year 2024 by 0.4 per cent to 5.6 per cent, due to a combination of factors including elevated inflation, import restrictions and financial sector vulnerabilities constrain private investment.
The GDP growth has been predicted in the World Bank’s “South Asia Development Update October 2023” report released Tuesday. The forecast is down from 6 per cent growth in FY23, while the government has set a target of 7.5 per cent GDP growth in FY24.
Earlier, the Asian Development Bank (ADB) predicted a 6.5 per cent GDP growth in Bangladesh in the current fiscal year.
Bangladesh made a strong recovery from the Covid pandemic, supported by an extensive stimulus package and accommodative monetary policy. But the post-pandemic recovery was disrupted in FY23, according to the WB in its twice-year-update.
Supported by economic growth, Bangladesh improved living conditions and reduced extreme poverty to 5.0 per cent in 2022 from 9.0 per cent in 2016, which is comparable to Latin America and the Caribbean countries and fares better than the South Asian average.
The new poverty numbers are based on the international poverty line of $2.15 a day (using 2017 Purchasing Power Parity) and the Bangladesh Bureau of Statistics (BBS)'s Household Income Expenditure Survey 2022 and re-estimation for 2016, the report added.
"Bangladesh's progress in reducing poverty is multi-dimensional-it has improved poor people's wellbeing, including in reduced infant mortality and stunting, and improved access to electricity, sanitary toilets, and education. The rural areas witnessed faster poverty reduction than the cities and towns," World Bank Country Director for Bangladesh and Bhutan Abdoulaye Seck said.
Risky outlook for South Asia
South Asia is expected to grow by 5.8 per cent this year-higher than any other emerging and developing region in the world, but slower than its pre-pandemic pace and not fast enough to meet its development goals,
The regional report forecasts growth to slow to 5.6 per cent in 2024 and 2025 in South Asia, as post-pandemic rebounds fade and a combination of monetary tightening, fiscal consolidation, and reduced global demand weigh on economic activity, according to the WB report.
Growth prospects are subject to downside risks, including due to fragile fiscal positions. Government debt in South Asian countries averaged 86 per cent of GDP in 2022, increasing the risks of defaults, raising borrowing costs, and diverting credit away from the private sector.
The region could also be affected by a further slowdown in China's economic growth and natural disasters made more frequent and intense by climate change.
"While South Asia is making steady progress, most countries in the region are not growing fast enough to reach high-income thresholds within a generation," World Bank Vice President for South Asia Martin Raiser said.
"Countries need to urgently manage fiscal risks and focus on measures to accelerate growth, including by boosting private sector investment and seizing opportunities created by the global energy transition," he added.
Constrained by fiscal challenges, South Asian governments have limited room to help their economies fully capitalize on the global energy transition. For South Asia, the energy transition could present an opportunity for future growth and job creation-if it leads to more investments by firms, cuts air pollution, and reduces the reliance on fuel imports.
"South Asia's energy intensity of output is about twice the global average and the region lags in the adoption of more advanced energy-efficient technologies," World Bank Chief Economist for South Asia Franziska Ohnsorge said.
"Improvements in energy efficiency, in the context of a rapid global energy transition, are an opportunity for South Asia to make progress toward both environmental and economic goals," she added.
