Home ›› 27 Jan 2023 ›› Front
The United Nations Department of Economic and Social Affairs (UN DESA) forecasts Bangladesh’s GDP growth at 6 per cent and 5.9 per cent for FY23 and FY24 respectively, due to weaker global demand, high inflationary pressure and tighter monetary policy.
A report, titled “World Economic Situation and Prospects 2023” and published by UN DESA on Thursday, assumes that the inflationary pressure will still be on during the current FY. However, for the next FY, it will drop one percentage point.
It forecasts the inflation rate to be at 7.4 per cent in FY23, which would fall to 6.4 per cent in FY24.
The International Monetary Fund (IMF) recently forecasted 6 per cent GDP growth for Bangladesh in FY23, which was 6.7 per cent earlier. Besides, the World Bank’s forecast was 5.2 per cent and Asian Development Bank’s (ADB) was 6.6 per cent for current FY.
According to a Bangladesh Bank press conference on Monetary Policy Statement (MPS) for H2 of FY23 held last week, the government cut GDP growth target to 6.5 per cent from 7.5 per cent for FY23, taking into consideration the global and domestic economic crises triggered by USD shortage and skyrocketing inflation.
The report also mentions that the South Asian regional GDP growth is expected to slow to 4.8 per cent for the calendar year 2023, from an estimated 5.6 per cent expansion in 2022.
The UN DESA clarified the lower forecast stating that the overall weaker global demand, tighter monetary policy, additional supply disruptions, further escalation in commodity prices and the emergence of new Covid19 variants pose significant risks in 2023 for the South Asian region.
Growth in India is expected to remain strong at 5.8 per cent for the calendar year 2023, albeit slightly lower than the estimated 6.4 per cent in 2022.
In this context, the report read, “The prospects are more challenging for other economies in the region. Bangladesh, Pakistan and Sri Lanka sought financial assistance from the International Monetary Fund (IMF) in 2022.”
The UN DESA projected that Pakistan’s economy is expected to expand by only 2.5 per cent in the calendar year 2023, which is the lowest in the region.
Meanwhile, the crisis country Sri Lanka’s economy is likely to shrink to 3.2 per cent in 2023 amid downside risks that consist of delays in securing IMF funding.
IMF Programme
The report stated that many countries are suffering from a debt burden. Bangladesh’s debt to GDP-ratio was near to 40 per cent in 2022, which was around 30 per cent in 2016.
Among the South-Asian countries, Maldives debt-to-GDP ratio was the highest at over 120 per cent in 2022.
The UN report added that the IMF programme is expected to help boost tax revenues and reduce fiscal deficits in coming years. Pakistan and Bangladesh reached staff-level agreements with the IMF in July and November 2022, respectively.
LDC issue
According to the UN report, seven nations – Angola, Bangladesh, Bhutan, Lao People’s Democratic Republic, Nepal, São Tomé and Principe and Solomon Islands – are in the process of graduating from the group of least developed countries.
As developed countries, these economies are particularly vulnerable to external shocks such as climate change, the Covid-19 pandemic, the war in Ukraine and slowing global growth.
Generally, limited fiscal space, underdeveloped social protection systems, and an absence of automatic stabilisers pose significant risks to their economic growth, stability and resilience.
Substantial heterogeneity in fiscal conditions exists among the graduating countries.
While fiscal deficits in Bhutan, Solomon Islands and, to a lesser extent, Lao People’s Democratic Republic have widened since the pandemic, fiscal balances in Bangladesh and Nepal have remained roughly unchanged.
The report recommends opportunities for increasing fiscal revenues through tax reform and rate increases, although it usually takes years to implement meaningful tax reforms and increase the tax base of a country.
