ADB trims GDP growth to 6.8% for Bangladesh in current fiscal year

The Asian Development Bank has revised the economic expansion forecast for Bangladesh to 6.8 per cent for the current FY22, which it projected at 7.2 per cent in April outlook.

The ADB made the projection in its latest Asian Development Outlook (ADO) 2021 update released Wednesday.

The growth projection reflects a strong recovery supported by strengthening manufacturing, continued expansion in the global economy and effective government recovery policies, said the updated annual flagship report of the Asian lender.

Inflation is expected to slightly edge up to 5.8 per cent and the current account deficit to narrow to 0.6 per cent of GDP in FY 2021-22, the report added.

The growth in FY 2021-22, however, is still expected to remain below pre-pandemic levels, it said.

Bangladesh achieved at least 7 per cent GDP growth since 2016 before the country was hit by Covid-19 in March 2020.

The main risk for Bangladesh or major advanced economies, ADB says, is the re-escalation of coronavirus disease (Covid-19) infection rates, which may reduce domestic and external demand.

“The Government’s policies for saving lives while protecting livelihoods underpinned the recovery process in Bangladesh, making it one of the few countries in the world sustaining commendable economic growth in recent difficult times,” said ADB Country Director Manmohan Parkash in a statement.

“Prudent macroeconomic management and efficient implementation of stimulus measures and social protection programs have helped. Continued efforts for job creation, quick vaccination, and improving domestic resource mobilisation will further accelerate the recovery process,” he added.

Parkash appreciated recent government initiatives in the areas of financial inclusion, and expanding social protection, and added, “Sustained reforms to increase business competitiveness, foreign investment, export diversification, skills development, and technology adoption will stimulate private sector investments and hasten economic recovery”.

In FY 2021-22, improving consumer confidence and the government’s fiscal and monetary stimulus measures are expected to boost private and public investment, said the report.

The central bank’s expansionary and accommodative monetary policy is expected to support the projected growth while keeping inflation contained. Strong remittances will stimulate private consumption, it pointed out.

The report, however, said that continued implementation of the increased fiscal and monetary stimulus measures is likely to create inflationary pressures.

A good crop outlook, consumer caution and underutilised production capacity should mitigate any upward pressure on prices, it noted.

Domestic administered prices for fuel may cushion the impact of increased crude oil prices, said the report.

ADB has reoriented its programme priorities in Bangladesh emphasising health and social protection, skills and rural development, water and sanitation, and the finance sector since the onset of the Covid-19 pandemic in early 2020.

The bank approved projects, programmes, and technical assistance worth over $1.8 billion for social protection, job creation, vaccine procurement, and emergency management of the Covid-19 pandemic.

ADB’s current sovereign portfolio in Bangladesh has 51 projects with around $12 billion.