However, Bangladesh remains one of the few countries to achieve commendable economic growth amid the pandemic, says ADB
Amid fears of a third wave of the Covid-19 pandemic, the Asian Development Bank (ADB) has revised Bangladesh’s economic growth forecast to 6.8% for the current fiscal year of 2021-22, down from its 7.2% projection from the April outlook.
In the latest update of its flagship economic publication, Asian Development Outlook (ADO) 2021, it also said that inflation is expected to slightly edge up to 5.8% and the current account deficit to narrow down to 0.6% of GDP in FY22.
The GDP, a monetary measure of the market value of all the final goods and services produced in a country in a specific time period, was 6.1% in the previous financial year.
The growth projection for the current fiscal reflects a strong recovery supported by strengthening manufacturing, continued expansion in the global economy and effective government recovery policies, the regional lender said in the outlook released on Wednesday.
However, FY22 growth is expected to remain below pre-pandemic levels, it said, adding the main risk is the re-escalation of Covid-19 infections in Bangladesh or major advanced economies, clipping 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.
He said that prudent macroeconomic management, and efficient implementation of stimulus measures and social protection programmes have helped. "Continued efforts for job creation, quick vaccination, and improving domestic resource mobilization will further accelerate the recovery process."
Appreciating recent initiatives in the areas of financial inclusion, and expanding social protection, Parkash said: “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 FY22, the report said, improving consumer confidence and the government’s fiscal and monetary stimulus measures are expected to boost private and public investment.
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, said the ADB -- which currently has 51 projects with around $12 billion around Bangladesh.
Inflation is expected to edge up to 5.8% in FY2022 reflecting recovery in economic activity. Continued implementation of the increased fiscal and monetary stimulus measures is expected to create inflationary pressures, it added.
A good crop outlook, consumer caution and underutilized production capacity should mitigate any upward pressure on prices. Domestic administered prices for fuel may cushion the impact of increased crude oil prices, the report said.
Prof Sayema Haque Bidisha, research director at South Asian Network on Economic Modeling (Sanem), told Dhaka Tribune: “Projections of WB, ILO, ADB, and many organizations are based on various methods. It can be said that our economy is performing at 90% capacity level amid the second wave of the Covid-19 pandemic.”
"The economy is on the way to recovery. Rather than focusing on estimation, we should focus on the quantitative numbers, disparity, long-term pandemic effect, and inclusiveness to the economy," she added.
Citing forecast limitations, the Sanem research director emphasized long-term recovery analysis and regaining economic participation.
Shahidullah Azim, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that normalcy has returned at most of the export destinations due to mass vaccination.
Their home markets, stores, retail outlets have all reopened like the pre-pandemic times, he added.
"A large number of people in our country are coming under the umbrella of vaccination. If the factories are open, and with all government policy support, the pace of production will increase, rather than decrease, in the coming months," Azim added.
“So, there is no chance to take this projection of ADB so seriously right now. We are getting a lot of orders and production is moving forward at its own pace. Hopefully, the export income will also increase,” he added.
He further said that over the last few months, the sector has been facing various types of infrastructural constraints related to ports, airports, gas, etc.
The apparel sector has always been instrumental in boosting Bangladesh's GDP and keeping the wheel of the economy moving, he added.
Growth forecasts for other countries
In the Asian Development Outlook 2021, ADB also predicted a 7.1% growth rate for developing Asia.
As of 2021, the projection for India has been revised down to 10% from 11.0%, with an improved outlook for next year of 7.5% from 7.0%.
China's growth forecast remained at 8.1%, the same as in April.
The growth outlook for the Maldives has been revised to 18% from 13.1%, owing to more favourable international tourism prospects.
The improvements in the response to the pandemic and government stimulus led to an increase in Pakistan's economic growth from 2% to 3.9%.
For Sri Lanka, ADB lowered the growth to 3.4% from 4.1%, and to 2.3% from 3.1% for Nepal.
The regional lender did not forecast any growth rate for Afghanistan in this September outlook. But, in the previous April outlook, it had predicted 3% economic growth for the country.