Bangladesh has been struggling in some areas, especially inflation and tax revenue, but the government maintains high growth ambitions with a proposed GDP target of Tk 55,973 billion for FY25, up from Tk 50,678 billion in the current fiscal year.
According to the finance ministry sources, geopolitical conflicts, commodity price volatility, and climate change pose significant global economic uncertainties, worsened by the Russia-Ukraine war.
Despite efforts to increase revenue in line with development plans, Bangladesh has historically struggled with a low Tax-to-GDP ratio.
The lingering impacts of Covid-19 pandemic and Russia-Ukraine war have disrupted supply chains, trade flows, and economic activities, hampering tax collection efforts.
The ministry notes that economic conditions in developed countries such as the European Union (EU) and the United States (US) are likely to improve, bolstering medium-term export and import growth prospects for Bangladesh.
This recovery is expected to boost demand for Bangladeshi products globally.
However, high interest rates, currency depreciation, and balance of payment pressures threaten macroeconomic stability. Consequently, Bangladesh faces increased economic uncertainty due to geopolitical conflicts and commodity price volatility.
Global crises have disrupted essential commodity supplies, leading to skyrocketing inflation and forcing many countries to adopt contractionary monetary policies, raising global interest rates.
These policies restrict capital flows to developing countries, deplete foreign exchange reserves, and increase foreign loan costs, negatively impacting Bangladesh's medium-term budget framework (MTBF).
As a result, Bangladesh's reserves have significantly decreased, necessitating a loan from the IMF.
High interest rates in major economies, currency depreciation, and balance of payments pressures threaten global macroeconomic stability, including in Bangladesh. Geopolitical conflicts, commodity price volatility, and climate change further heighten economic uncertainty.
Global crises have disrupted supplies of essential commodities like oil, gas, fertilizers, and wheat, causing inflation to skyrocket. Many countries have adopted contractionary monetary policies to combat high inflation, raising global interest rates.
These policies restrict capital flows to developing economies and encourage investors to withdraw capital, depleting foreign exchange reserves and increasing foreign loan costs. Consequently, Bangladesh's reserves have significantly decreased, forcing the government to borrow from the IMF.
The Eighth Five-Year Plan (2020-2025) and the second Perspective Plan (2021-2041) outline goals for higher growth, poverty alleviation, investment, export growth, infrastructure development, human development, and environmental sustainability.
However, global economic challenges have impacted progress toward these goals.
According to the World Economic Forum's January 2024 Chief Economist's Outlook, 56% of chief economists expect a global growth slowdown in the coming year.
The World Bank's Global Economic Prospects January 2024 report projects global growth of 2.6 per cent in 2023, 2.4 per cent in 2024, and 2.7 per cent in 2025.
The IMF's World Economic Outlook (WEO) report for April 2024 is slightly more optimistic, projecting 3.2 per cent global growth for 2024 and 2025.
Historically, the global economy averaged 3.92 per cent growth in the 2000s and 3.51 per cent from 2011 to 2019.
Recent years' lower growth rates reflect high inflation, tight monetary policies, and poor trade conditions due to the Covid-19 pandemic and Russia's invasion of Ukraine.
Bangladesh aims to become an upper-middle-income country by 2031 and a developed country by 2041. However, the Covid-19 pandemic, Russia-Ukraine war, and recent geopolitical tensions may delay achieving these goals.
