Economic slowdown in key export destinations, particularly in the European Union (EU) and USA, could pose a potential risk to Bangladesh’s GDP growth prospects in the coming days.
The World Bank made the observation on Tuesday in its latest “Global Economic Prospects” for January 2024 update.
The estimated economic growth in the USA will be 1.6 per cent in FY24 and 1.7 per cent in FY25 respectively, while the estimated growth was 2.5 in FY23. The EU will witness an estimate of 0.7 per cent growth in FY24 and 1.6 per cent in FY25, the report mentions.
It added that the growth in Bangladesh is expected to rise in FY2024-25 as inflationary pressure recedes, but it will slow down to 5.6 per cent in FY2023-24, the report said. However, the country's economy is likely to pick up at 5.8 per cent in the next fiscal year (FY25).
Inflation is likely to remain elevated, weighing on private consumption. As foreign exchange reserves are likely to stay low, import restrictions are expected to continue and impede private investment, the World Bank observed.
In contrast, public investment is envisaged to remain resilient.
In Bangladesh, growth is estimated to have slowed to 6 per cent in FY2022-23, as economic activities were hampered by import restrictions and rising material and energy costs, as well as mounting external and financial pressures.
Headline consumer price inflation increased in 2023, mainly driven by rising food prices and currency depreciation, resulting in tighter monetary policy. Balance of payments deteriorated, along with a decline in foreign exchange reserves, the report added.
Financial sector vulnerabilities rose, as nonperforming and other stressed loans increased.
Besides, heightened uncertainty around elections in 2024 in some countries, including Bangladesh, Bhutan, India, Maldives, and Pakistan, could dampen activity in the private sector, including foreign investment, the World Bank reports.
However, the implementation of growth-friendly policies after elections could improve growth prospects, The World Bank added that if combined with political or social unrest and elevated violence, this could further disrupt and weaken economic growth.
Meanwhile, the voting across the country was mostly peaceful, except a few incidents of violence that left two people dead and allegations of irregularities including rigging or ballot stuffing in different parts of the country.
Now, experts opined the new government should have to focus on stabilising macroeconomy, revenue mobilisation and banking sector reforms.
Former lead economist of the World Bank Dhaka Office Zahid Hussain said, “The new government should have to take necessary measures to reform the banking sector and revenue administration as election ends so that forex crunch cannot be reduced further, and revenue mobilisation can be increased.”
“There is no scope to wait for global economic strain curtails, and then our external account imbalance will be balanced. Instead, we should take into account the post-election period soon.”
Besides, the World Bank said Growth in South Asia (SAR) is estimated to have slowed slightly to 5.7 per cent in 2023, yet it remains the fastest among emerging market and developing economy regions.
This is largely attributed to a robust expansion in India, which accounted for more than three-fourths of the regional output in 2023. Excluding India, however, activity was more subdued, the report adds.
