Asian Development Bank (ADB) has projected Bangladesh’s gross domestic product (GDP) growth to be 6.5 percent in the fiscal year 2024, compared to an estimated growth of 6 percent in fiscal 2023. The projection was made in the latest ADB report, ‘Asian Development Outlook (ADO) September 2023,’ released today. The ADB in a press release said that the growth forecast reflects an improvement in domestic demand and better export growth due to economic recovery in the Eurozone. ADB, Deutsche Bank ink risk sharing agreement to boost supply chain financing in Asia The ADB also mentioned that inflation in Bangladesh is projected to ease from 9 percent in FY2023 to 6.6 percent in FY2024. The current account deficit is expected to slightly narrow from 0.7 percent of GDP in FY2023 to 0.5 percent of GDP in FY2024 as remittance growth improves. The main risk to this growth projection is a further deterioration in export growth if global demand is weaker than expected, the press release said. Global trade finance gap expands to 2.5 trillion USD in 2022: ADB ADB Country Director Edimon Ginting said that the government is managing relatively well against the external economic uncertainties, while advancing infrastructure development and critical reforms to improve the investment climate. “These key structural reforms include to strengthen public financial management, enhance domestic resource mobilisation, improve logistics, and deepen financial sector, which are critical for private sector development, export diversification and productive job creation in the medium term,” he said. ADB to provide Bangladesh $300 million loan to boost skills of labour force He mentioned that continued high oil prices also provide a good incentive to accelerate reforms to expand domestic renewable energy supply and achieve the country’s climate change goals. The ADO September 2023 states that moderate inflation and an increase in remittances will contribute to reviving private consumption, while the completion of a number of major government infrastructure projects will boost investment. Private investment, however, may be dampened by the initial higher interest rates following the enhancement in the country’s monetary policy framework. Inflation is expected to ease in FY2024 with some fall in global non-fuel commodity prices, expected higher agricultural production, and the initial tightening of monetary policy under the new framework.

Bangladesh made a rapid recovery from the Covid-19 pandemic, supported by prudent macroeconomic policies, but the economy now faces considerable challenges with global uncertainty, rising inflationary pressure, energy shortage, a balance-of-payments deficit, and a revenue shortfall, says the World Bank in its half yearly update released today (April 04, 2023). The Bangladesh Development Update April 2023, entitled “Trade Reform: An Urgent Agenda”, says that accelerating the implementation of structural reforms, including trade reforms and export diversification, will help Bangladesh navigate the current challenges and sustain growth momentum. Growth in Bangladesh is expected to accelerate over the medium term, as inflationary pressure eases, external conditions improve, and reform implementation gains momentum. Real GDP growth is expected to decelerate to 5.2 percent in FY2023 due to rising inflation, tighter financial conditions, disruptive import restrictions, and global economic uncertainty. In FY2024, growth is expected to pick up to 6.2 percent. Read More: ADB lowers Bangladesh’s GDP growth forecast to 5.3% in FY 23 “Russia’s invasion of Ukraine and global uncertainty have impacted countries around the globe.   Bangladesh’s post-pandemic recovery has been disrupted by elevated commodity prices, rising interest rates, and slowing global growth,” said Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan. “The World Bank stands ready to support Bangladesh with reforms to accelerate growth and strengthen resilience.” Higher commodity prices have contributed to inflationary pressure. The balance-of-payments deficit reached $7.2 billion in the first half of FY2023, up from $5.3 billion in FY2022, creating considerable pressure on foreign exchange reserves. A multiple exchange rate system has contributed to the balance of payments pressure, disincentivizing export and remittance inflows. Moving towards a single market-based exchange rate will help restore external balance. Risks to the outlook remain elevated. Domestic banks faced challenges with tighter liquidity and increasing non-performing loans. The fiscal deficit widened in FY2023, with higher financing from domestic banks. However, the January 2023 joint World Bank-IMF Debt Sustainability Analysis (DSA) assessed that Bangladesh remained at low risk of debt distress. Read More: Expand tax net and integrate digital system to enhance tax-GDP ratio, ICAB urges NBR in budget proposal Improving trade competitiveness for export diversification will be critical to achieving Bangladesh’s aspiration of upper middle-income status by 2031. “The ready-made garments sector accounts for about 83 percent of Bangladesh’s exports. The Covid-19 pandemic underscored the risk of overreliance on a single sector,” said Bernard Haven, World Bank Senior Economist and co-author of the report. “Diversifying exports and improving competitiveness will help Bangladesh achieve upper-middle income status by 2031. For this, it will be important for Bangladesh to reduce both tariff and non-tariff barriers. A comprehensive reform program can strengthen regional integration, particularly with South Asia and Southeast Asia.” The Bangladesh Development Update is a companion piece to the South Asia Economic Focus, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia region and analyzes policy challenges faced by countries. The Spring 2023 edition, titled “Expanding Opportunities: Toward Inclusive Growth”, launched on April 4, 2023, shows that South Asia’s growth prospects have weakened due to tightening financial conditions, with large downside risks in most countries given limited fiscal space and depleting reserves. It also analyzes the high level of inequality of opportunity in the region and offers recommendations to achieve more equitable and inclusive growth. Read More: Govt struggles to lift tax-GDP ratio to double digits