BB projects 6.1% GDP growth

Given the current state of some selected economic indicators, the country’s economy will grow by 6.10 per cent during the ongoing fiscal, said Bangladesh Bank (BB) in its financial forecast.

However, if the overall situation turns around and economic performance in some sectors puts up a good show compared to what is currently evident, the GDP would grow by 6.68 per cent in FY22.

A BB publication titled Recent Practices of Forecasting Real Gross Domestic Product (GDP) and Inflation in Bangladesh, the central bank made the forecast on the country’s economic growth for the Fiscal Year 2021-22.

“The growth rate of the country’s GDP has been projected to hover between 6.10 per cent and 6.68 per cent for the ongoing FY22. On the other hand, inflation has been anticipated to be 5.51 per cent to 5.82 per cent under the model-based approach for the current fiscal.

According to Bangladesh Bureau of Statistics (BBS) data, the country recorded 3.51 per cent GDP growth in FY20. As per the provisional data, GDP growth is estimated at 5.47 per cent in FY21.

For FY22, the government set the target to attain 7.20 per cent GDP.

“We have made the forecast based on the current performance of some selected sectors. If this trend keeps up as it is now, GDP will grow by 6.10 per cent in FY22,” Bangladesh Bank Research Department General Manager Sayera Younus, who led the research team, told The Business Post.

“If some sectors perform better than their present status, we expect to record a 6.68 per cent GDP growth in FY22,” she opined.

However, the growth rate could be around 7 per cent if the present global economic condition was taken into consideration since the third wave of Covid-19 hit Bangladesh’s economy harder than the global one, the researcher pointed out.

The central bank strives to forecast the GDP based on the projection of various sub-sectors.

How growth is forecast

The GDP is forecast based on the data of three main sectors – agriculture, industry and services – which incorporate a set of 15 sub-sectors.

“Some sub-sectors such as manufacturing, construction, financial intermediations, real estate, renting and business, and health are leading the recovery process in the period after the first wave of Covid-19 pandemic compared to other sub-sectors,” observed the central bank.

As stated by the research, manufacturing, real estate, construction and healthy remittance inflow will help the economy to flourish.

“The manufacturing sub-sector which is mostly represented by RMG shows some rebounding signs based on the prospect of apparel export. RMG export represents about 8.46 per cent of the GDP of FY20,” finds the BB research.

As economies across the world have started to open up, Bangladesh’s total exports also grew riding on the apparel sector. Most global brands are returning and reinstating their orders.

Besides, Bangladeshi apparel export did not get adversely affected in April 2021 despite the second wave of the pandemic.

Construction, a sub-sector, is gaining its lost momentum as the government resumed its mega projects like construction of Padma Bridge, Metrorail Project, Rooppur Nuclear Power Plant, etc.

Real estate, renting and business sub-sectors have shown revival signs as untaxed income have been allowed to go into land or apartment purchase.

The reduction in registration fees is increasing the demand for land and apartments.

However, a record amount of remittance inflow may play an important role in raising the consumer demand dampened by the pandemic.

Remittance contributes 5.51 per cent to GDP and its role in expediting economic recovery is crucial.

Remittance inflow in FY21 was $ 24.77 billion which was 36 per cent higher than that in FY20.

Challenges ahead

A slower performance or further deterioration in Covid-19 pandemic may stand in the way of economic growth. The remaining sub-sectors of the economy account for another 50 per cent of GDP.

Now the current situation is throwing up a challenge to those sub-sectors to bounce back which may result in their underperformance, and an expected GDP growth set for FY21 might falter, forecast the researchers.

The education sub-sector is facing severe uncertainty over its reopening though online classes are well underway to reduce loss. The sector is unlikely to support adequately to achieve the GDP target.

Transport, storage and communication sub-sectors were doing well till the second wave of pandemic hit the country, posited the Bangladesh Bank.

However, the pandemic-induced lockdown from April this year brought these sub-sectors to the knees. Hotels, restaurants, wholesale and retail trade were also hit hard.

Similarly, agriculture suffered a demand shock caused by the second wave of Covid-19 and a supply shock by various natural calamities from the upcoming monsoon which made it difficult for the sector to outpace its last few years’ contribution to GDP, according to the central bank research findings.