Home ›› 07 Oct 2022 ›› Front
The World Bank has trimmed the GDP forecast for Bangladesh by 0.6 percentage point to 6.1 per cent for the current fiscal year, and for FY22, it raised the GDP forecast by 0.8 percentage point as well.
According to the Bangladesh Bureau of Statistics (BBS) provisional data, Bangladesh attained 7.25 per cent GDP growth in the last fiscal year.
Published on Thursday, the World Bank report “South Asia Economic Focus 2022: Coping with Shocks Migration and the Road to Resilience” read, “In Bangladesh, the GDP growth is projected to decelerate slightly to 6.1 per cent in FY2022-23, as higher inflation and rolling electricity blackouts dampen the post-Covid recovery in consumption and investment.
“The lack of reliable high-frequency indicators creates difficulties for policymakers in tracking economic developments. Higher inflation is expected to dampen private consumption growth, following substantial energy price increases.”
The report further mentioned that export growth is expected to slow, as economic conditions in key export markets deteriorate, while rolling blackouts, gas rationing, and rising input costs weigh on manufacturing output.
On the matter, World Bank Vice President for South Asia Martin Raiser said, “Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia’s economies.
“In the face of these shocks, countries need to build stronger fiscal and monetary buffers, and reorient scarce eign exchange reserves. That is a problem that should be recognised behind the GDP growth numbers.
“Many other countries in South Asia are facing a changing situation.”
Migration and remittance situation
According to the report, in Bangladesh, while remittance inflows have recovered since 2021 and stayed above the pre-pandemic levels, the year-over-year growth of remittance inflows has slowed and even turned negative in some months.
As a result, remittance inflow can only offset part of the trade deficits, leading to widening current account deficits. International migration in South Asia is recovering.
Recent data from national administrative records on registered overseas workers in Bangladesh, Pakistan, and Sri Lanka show that international migration in South Asia is recovering and appears to have rebounded to pre-COVID levels in the first half of 2022.
The recovery of international migration is somewhat stronger in Bangladesh, where 617,000 migrants registered for overseas employment in 2021, compared with a 5-year pre-COVID annual average of 750,000.
Recent data on permits issued in the first half of 2022 show that migration flows might rebound to pre-COVID levels or even beyond in Pakistan and Bangladesh.
For example, in Bangladesh, 600,000 migrants registered for overseas employment in the first 6 months of 2022, compared to 617,000 in all of 2021.
Exchange rate
Facing increased pressure on its exchange rate and a rising gap between the official and informal exchange rates, Bangladesh switched to a floating regime in early June but only for a few days, which resulted in a depreciation of about 11 percent against the US dollar, read the World Bank report.
In mid-September, the Bangladesh Bank adjusted the official exchange rate in line with market rates, leading to 11.7 per cent depreciation in a single day.
Besides, diesel prices in Bangladesh exhibit low volatility and price changes are uncorrelated with global price movements, as fuel subsidies play an important role in domestic pricing.
Projection for the region
The report also projected regional growth to average 5.8 per cent this year – a downward revision of 1 percentage point from the forecast made in June. This follows the growth of 7.8 per cent in 2021 when most countries were rebounding from the pandemic slump.
Beset with Sri Lanka’s economic crisis, Pakistan’s catastrophic floods, a global slowdown, and the impacts of the war in Ukraine, South Asia faces an unprecedented combination of shocks on top of the lingering scars of the Covid-19 pandemic, read the report.
Growth in the region is dampening, says the World Bank in its twice-a-year update, underscoring the need for countries to build resilience.
Timmer said, “Labour mobility across and within countries enables economic development by allowing people to move to locations where they are more productive. It also helps adjust to shocks such as climate events to which South Asia’s rural poor are particularly vulnerable.
“Removing restrictions to labour mobility is vital to the region’s resilience and its long-term development.”
To this end, the report offers two recommendations. First, cutting the costs migrants face should be high on the policy agenda. Second, policymakers can de-risk migration through several means including more flexible visa policies, mechanisms to support migrant workers during shocks, and social protection programmes.
