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With continued recovery in exports and consumption, Bangladesh’s economy is expected to grow by 6.4 per cent in Fiscal Year 2021-22, the World Bank forecast in its latest report.
In line with the projection, exports are expected to grow by 9.4 per cent while imports 7.7 per cent. Similarly, private consumptions will rise by 5.5 per cent and public consumption 8.7 per cent.
The global lender made the projection in its newest report on South Asia Economic Focus titled Shifting Gears: Digitization and Services-Led Development released on Thursday.
“A gradual recovery is expected as Bangladesh navigates the persistent effects of Covid-19. The GDP growth is forecast to reach 6.4 per cent in FY22 before accelerating to 6.9 per cent in FY23 as exports and consumption continue to recover,” said the World Bank.
For the current fiscal, Bangladesh set 7.2 per cent GDP growth.
The surge in official remittance inflows is unlikely to persist if the net outflow of migrant workers slows in FY22 and if the use of formal payment channels declines, according to the report.
It said revenue mobilisation will be supported by the ongoing policy and administrative reforms to Value Added Tax (VAT) and income tax while higher capital expenditure on mega infrastructure projects is likely to shoot up public expenses as well.
The fiscal deficit is estimated to remain above 5.5 per cent of GDP over the medium term.
The agriculture sector is expected to see 4.1 per cent growth followed by industry 8.1 per cent and service sector 5.6 per cent.
Risks remain ahead
While being on the rebounding trajectory, economic growth might face some downside risks, i.e. weak domestic revenue growth and higher Covid-19 related expenditure.
“Sustaining the economic recovery and reducing poverty further will depend in part on mitigating economic scarring through targeted support to vulnerable households and businesses,” the global lender pointed out.
In the financial sector, contingent liabilities from non-performing loans combined with weak capital buffers could necessitate recapitalisations of state-owned banks and depress credit growth.
The World Bank observed that while the demand for RMGs appears to be stabilising, the sector’s full recovery is yet to be made and still fragile.
Likewise, the demand for Bangladesh’s migrant workforce in the Gulf countries may also be impacted by the ongoing recession in that region, impairing future remittance inflows.
Projection on South Asian Nations
The South Asian Economies are projected to grow by 7.1 percent in 2021 and 4.4 per cent in 2022.
The South Asian average annual growth is forecast to be 3.4 per cent over the period of 2020-23, which is 3 percentage points less than what was evident in the four years preceding the pandemic.
“The region’s recovery continues as global demand rebounded and targeted containment measures helped minimise the economic impacts of the recent waves of Covid-19. But the recovery remains fragile and uneven, and most countries are far from pre-pandemic trend levels,” as per the WB update.
India’s economy, South Asia’s largest, is expected to grow by 8.3 per cent in the Fiscal Year 2021-22 aided by an increase in public investment and incentives to boost manufacturing.
In Maldives, GDP is projected to grow by 11 per cent followed by Nepal 3.9 per cent, Bhutan 3.6 per cent, Pakistan 3.4 per cent and Sri Lanka 2.1 per cent.
“The pandemic has had profound impacts on South Asian economy. Going forward, much will depend on the speed of vaccination, the possible emergence of new Covid variants, as well as any major slowdown in the momentum of global growth,” said Hartwig Schafer, World Bank Vice President for the South Asian Region.
“While short-term recovery is important, policymakers should also seize the opportunity to address deep-rooted challenges and pursue a development path that is green, resilient and inclusive.”
The World Bank report also noted that Covid-19 has left long-term scars on the region’s economy, the impacts of which can last well into the recovery.
“Many countries experienced lower investment flows, disruptions in supply chains, and setbacks to human capital accumulation, as well as substantial increases in debt levels. The pandemic is estimated to have caused 48 to 59 million people to become or remain poor in 2021 in South Asia,” said the South Asia Economic Focus.
“Countries in South Asia have a strong comparative advantage in exporting services, particularly business processes and tourism, whereas they have struggled to break into manufacturing export markets,” according to Hans Timmer, World Bank Chief Economist for the South Asian Region.
“To realise the potential of the services-led development, the region needs to rethink regulations and establish new institutions to support innovation and competitiveness,” added Hans.
