Bangladesh’s GDP growth will strengthen further showing signs of recovery with higher remittances, exports and other indicators, says ADB new report.
The country’s GDP growth is projected to accelerate 6.8 percent in FY2021 with stimulus package implementation and recovery in global growth and world trade, it says.
“The economy was showing signs of recovery with higher remittances, exports and other indicators, but the recent surge in pandemic and the lockdowns are likely to trim our GDP growth projection of 6.8 percent for the fiscal year 2020-2021 by at least one percentage point,” Manmohan Parkash, Asian Development Bank (ADB) Country Director, said.
He came up with the statement while addressing virtually the launching of the latest Asian Development Bank (ADB) report “Asian Development Outlook (ADO) 2021” released on Wednesday.
He said the future economic growth of Bangladesh will depend on recovery in domestic economic activities fuelled mainly by implementation of stimulus packages, strong inflow of remittances and rebound in global trade amid projected growth in major export destinations.
The ADB Country Director said attaining the targets of development and other spending could be challenging as revenue collection in the first eight months of FY 2021 grew by only 5.2 percent compared to 9.1 percent growth in the same period a year earlier.
“Concerted efforts are needed for achieving the annual development programme spending and boosting revenue. The outlook is subject to downside risks. Resurgence in Covid-19 cases and delays in availability in the supply of vaccines–both globally and domestically– could undermine the economic growth outlook,” he continued.
Parkash said under sustained global recovery and effective Covid -19 management, GDP growth is expected to further strengthen to 7.2 percent in FY2022.
The report said despite headwinds from the Covid-19 pandemic, Bangladesh’s GDP growth is forecast higher in FY2021 and FY2022 in line with a projected global economic rebound.
It said the GDP growth in FY21 is expected to moderate from the earlier estimate of 6.8 percent to 5.5-6.0 percent due to the resurgence of the Covid-19 cases.
Compared to many developed countries in North America and Europe, and also other developing countries in Asia and the Pacific, the acuteness of the pandemic was less severe in Bangladesh during the first wave in 2020.
Bangladesh coped up reasonably well against the pandemic and the economy showed early signs of recovery. Through FY 2020 GDP growth plummeted to an estimated 5.2 percent from 8.2 percent in the previous year, it picked up in subsequent months supported by stimulus package implementation and recovery in global growth and world trade.
Record remittance inflow kept domestic demand buoyant and underpinned solid growth in private consumption. Unemployment, which had increased to 22.4 percent in April-July 2020, dropped sharply to 3.8 percent in September with stimulus package implementation and broad resumption of economic activity.
On the supply side, growth in the agriculture, industry and service sector picked up. Medium-sized and large manufacturers reversed production volume contraction by 16.4 percent in Q4 FY 2020 with 6.8 percent growth in Q1 FY 2021. Likewise, bank credit to trade and commerce increased by 15.5 percent and consumer finance by 11.9 percent in the same period.
Cargo handled at the Chattogram port revived to the level recorded a year earlier. The commencement of the vaccination drive in February 2021, together with the improved global economic conditions and trade, and employment, helped the economic recovery.
“However, we are now experiencing the second wave of the pandemic with an increased number of infections and deaths. The healthcare system has been stretched again to its limits. The government has imposed lockdown and travel restrictions to control the spread of infection. These necessary measures will save lives but could adversely affect livelihoods and slow down economic recovery,” an ADB statement said.
The potential slowdown in vaccination due to supply-related issues may further exacerbate the already adverse situation. Moreover, the impact of the second wave in export-destination countries could also undermine economic recovery.
Given that the second wave of Covid-19 is ongoing, and the situation is still fluid, these impacts were not considered in our outlook.
Revenue collection may also be higher than last year. Inflation is expected to be manageable in the range of 5.5 to 6 percent.
Broad money growth is likely to reach the annual target of 15 percent. Overall growth in imports is expected to be modest, and the trade deficit is forecast to narrow marginally as recovery in exports outpaces imports.
The current account balance is expected to cross into a small surplus. Growth in revenue, however, is expected to be the modest. Public expenditure is targeted to grow more than the growth in revenue leading to a slightly higher deficit – about 6 percent.
